INDIAN billionaire Gautam Adani's group is considering launching a new airline, a move that could change competition in a market dominated by IndiGo and Air India, according to two sources with direct knowledge of the matter.
The proposal marks a shift for the ports-to-cement conglomerate, which operates eight airports in India, including two in Mumbai. The group has an $11 billion airport expansion strategy but had earlier said it was not looking to enter the airline business.
No final decision has been taken and the group is still evaluating the proposal because airlines are considered a difficult business with limited profitability, the first source said. The source declined to be identified because they were not authorised to speak to the media.
The Indian government has privately encouraged business groups, including Adani, to consider starting an airline following increased scrutiny of Air India after its fatal Ahmedabad crash last year and IndiGo's operational challenges, which disrupted air traffic in December, the source said.
"It's a difficult business, but Adani wants to consider it in the national interest," the source added, saying the government had realised that Air India's struggles and the IndiGo crisis meant another major airline was needed.
Shares of Adani Enterprises fell more than 3 per cent on Thursday. Discussions within the group are still at an early stage and there is no timeline for a decision.
Adani is Asia's second-richest person with a net worth of about $89 billion. An airline venture would be one of the biggest moves of his business career.
High taxes, competition and supply-chain problems have pushed Indian airlines Kingfisher, Jet Airways and Go First into bankruptcy over the last 15 years.
While Adani has expanded into sectors including ports and airports, the group has since 2024 dealt with charges in the United States over alleged bribes linked to a solar project. US authorities have since decided to drop those charges.
India is one of the world's fastest-growing aviation markets, but concerns over a duopoly remain. IndiGo holds a 65.4 per cent share of the domestic market, while Air India has 25 per cent.
The Indian government said last year it aims to increase the number of airports to between 350 and 400 by 2047, up from 74 in 2014, as passenger traffic grows and airlines place record aircraft orders with Boeing and Airbus.
Adani's entry "has the potential to reshape India’s aviation landscape," said Rajan Mehra, former India head of Qatar Airways, adding that India must also focus on robust regulatory safeguards and ensure there remains a a level playing field for all airlines.
One option being considered is buying a stake in an existing airline, the second source said, adding that "all options" were on the table.
In December, India warned IndiGo of regulatory action after it cancelled thousands of flights because of a shortage of pilots, leaving passengers stranded and prompting government intervention to curb a rise in airfares.
Loss-making Air India has faced a series of audit lapses since last year's Dreamliner crash that killed 260 people. Smaller airline SpiceJet continues to face financial challenges and salary delays.
Air India is unlisted, but IndiGo shares fell more than 1 per cent in Mumbai trading on Thursday after news of Adani's possible entry, while SpiceJet shares rose 10 per cent.
Adani's youngest son, Jeet Adani, a director at Adani Airports, told Reuters in December that the group was not interested in the airline business because of its thin margins and because it did not have the "mindset" needed to run a carrier.
"Our comfort and our core competency is in creating hard assets on the ground, long-gestation assets, running them quite efficiently," he said at the time.
The group has continued to invest in aviation infrastructure. Adani Airports said last month it plans to invest more than $2 billion to develop airport-linked commercial districts across six locations, including hotels, retail centres and office space.
Adani has also approached the government seeking to dilute a rule restricting certain airport operators from holding stakes in scheduled airlines, the Economic Times reported earlier on Thursday.
"There are niche examples of airports also owning airlines in markets such as Kyrgyzstan, Thailand and Vietnam ... Other airlines in India would rightfully be concerned about a possible conflict of interest," said independent aviation analyst Brendan Sobie.
Meanwhile, a March inspection by health officials at Adani's Mumbai international airport found that the sale of nicotine pouches at its duty-free shops was against the law. The company is challenging that decision in the Mumbai High Court, Reuters has reported.
(With inputs from Reuters)
