Yet, this critique carries a notable irony. The domestic airport infrastructure landscape, too is marked by a near-duopoly — or, more accurately, an oligopoly — with 3-4 significant players exerting outsized control. 

India’s domestic airline market is increasingly consolidated, with two major players — IndiGo and Air India (post its merger with Vistara and others) — dominating. Smaller players like SpiceJet and Akasa Air face significant operational and financial challenges, further eroding competition. Naidu’s critique of this situation concerns limited consumer choices, potential fare hikes and reduced competitive pressure for service quality improvements.

The key players who control India’s airport sector are:

GMR Group: Operates major hubs like Delhi and Hyderabad airports.

Adani Group: Operates seven airports, Mumbai, Ahmedabad, Jaipur, Lucknow, Mangaluru, Guwahati and Thiruvananthapuram.

Airport Authority of India (AAI): This body still controls many smaller airports, but has been privatising rapidly.

Others: Players like Fairfax India (operating Bangalore Airport) contribute to the competitive landscape.

Market Concentration

With the privatisation of several airports under the government's privatisation drive, concerns have emerged about market concentration. Unlike the competitive pressures in airlines, the airport sector's barriers to entry, such as high capital requirements and regulatory hurdles, limit the possibility of new entrants.

One of the most significant changes following Adani's takeover of these airports has been the introduction and increase in user development fees (UDF). UDF is charged to passengers for airport development and maintenance. With project costs skyrocketing, there has been a tendency to hike user charges, making airline travel that much costlier for passengers. A review of recent developments at some airports will make the point abundantly clear.

Thiruvananthapuram Airport: Current UDF rates have increased by over 50 per cent. It is set to rise further in the future, reaching Rs 840 for domestic and Rs 1,680 for international passengers in FY26, and Rs 910 and Rs 1,820, respectively, in FY27. For the first time, arriving passengers will incur UDF charges, with domestic arrivals set at Rs 330 and international arrivals at Rs 660.

Ahmedabad Airport: The Ahmedabad International Airport has proposed a dramatic increase in UDF from Rs 100 to Rs 703 for domestic departures, and from Rs 703 to Rs 1,400 for international departures. This proposal is subject to regulatory approval and reflects ongoing capital expenditure projects estimated to cost over Rs 11,000 crore. If approved, the UDF will further rise to Rs 738 for domestic and Rs 1,470 for international departures, starting April 2024, and subsequently to Rs 775 and Rs 1,544 by April 2025.

Mangaluru Airport: From April 2024, UDF will go up from Rs 560 to Rs 700m for domestic departures. For international departures, it will go up from Rs 1,015 to Rs 1,050. From 2025, domestic departures will incur Rs 735 as UDF, and international departures Rs 1,120. The fees for arriving passengers will increase from Rs 240 to Rs 300, and for International arrivals, Rs 435 to Rs 450. From April 2025, this is set to rise to Rs 315 for domestic arrivals, and to Rs 480 for international arrivals.

Similar proposals for steep tariff hikes were made for other airports, indicating a trend towards increasing passenger costs as part of revenue generation strategies.

By utilising the funds raised from the UDF, airport developers have committed to substantial reinvestment in its airport operations. The Adani Group alone plans to invest approximately Rs 1.75 lakh crore (around US$ 21 billion) over the next decade to enhance its airport infrastructure and services. This investment will focus on city-side development, aiming to increase non-aeronautical revenue streams significantly.

With only a few players controlling most airport operations, more competition is needed to ensure optimal pricing and service quality. Passenger charges, landing fees and ancillary costs are determined with limited oversight or counterbalancing forces. 

While the Airports Economic Regulatory Authority (AERA) oversees pricing and operational standards, its ability to enforce robust competition still needs to be improved. Privatised airports often negotiate long-term concession agreements, reducing flexibility in introducing new competitive terms.

The Way Forward

Airport fees, including UDF and landing charges, are passed on to passengers via ticket prices. These fees remain high in an oligopolistic airport environment. 

According to the International Civil Aviation Organisation, future airport privatisation rounds should ensure broader participation, encouraging smaller, diversified players to bid for operations. The government can incentivise new entrants by offering infrastructure development risk-sharing mechanisms or financial support.

Discussions about airport charges and market dynamics echo the need to promote new airlines to enhance competition. The International Civil Aviation Organization (ICAO) emphasises the importance of non-discrimination and transparency in charges, which can facilitate a more competitive environment by allowing new entrants to challenge established players. 

The European Commission's directive on airport charges mandates transparency and consultation between airports and airlines regarding fee structures. This regulation aims to prevent monopolistic pricing behaviour by ensuring that charges are justified and reflect the costs of services provided.

The ICAO also highlights the need for robust regulatory frameworks to monitor anti-competitive practices and ensure that airlines and airports operate pretty within the market. The discourse around consumer protection in aviation includes recommendations for limiting fare increases during peak seasons or on monopolistic routes. The IATA points out that effective regulation of airport charges can lead to lower ticket prices, benefiting passengers directly.

The critique of the duopoly in airlines highlights a vital concern, but it also underscores the need for introspection about the near-oligopoly in the airport sector. 

Addressing this imbalance requires a combination of more robust regulatory frameworks, competitive privatisation practices, and incentives for new entrants. By doing so, India can ensure a holistic approach to improving its aviation ecosystem, leading to fairer passenger fares, better service quality, and a more equitable industry landscape.