Author : Leela Tarang Krishna Paladugu (Assistant Professor, JGLS)

Article Type - CRG Report


14.1 Introduction

The ambitious scope of India’s Aviation Vision 2047—forecasting over 1.1 billion passengers across 350 airports requires a sophisticated, multilayered governance system. This framework is anchored by the "Regulatory Quartet"꞉ the Airports Authority of India (AAI), the Airport Economic Regulatory Authority (AERA), the Director General of Civil Aviation (DGCA), and the Competition Commission of India (CCI).

 

This paper argues that India is pioneering a unique model where these four bodies collaboratively and actively steer the market through distinct but complementary strategies꞉ AAI fostering competition for the market, AERA simulating competition in natural monopolies, DGCA regulating market behavior (e.g., slots and pricing transparency), and CCI acting as the ex-post guardian.

 

This article first outlines the statutory basis, including the new Bharatiya Vayuyan Adhiniyam (BVA), 2024, and then analyzes recent regulatory actions to demonstrate the depth and synergy of this competition framework.

 

14.2 Statutory Frameworks

 

The legal governance of India’s airports and air transport services is a multi-layered architecture where three primary bodies—AAI, AERA, and the DGCA—manage the infrastructure, economics, and technical standards, respectively.

 

AAI꞉


Established under the Airports Authority of India Act, 1994, the AAI functions as both a service provider and a developer. The core of its economic power resides in Section 22, which empowers the Authority to charge fees or rent for the landing, housing, or parking of aircraft, and for providing air traffic services, ground safety, and passenger amenities. While AAI manages the regional airports (airports under 3.5 Million Passengers), its role in competition is most evident through Section 12A, which allows it to lease airport premises to private entities in the public interest, thereby transitioning public monopolies into regulated private concessions.

 

AERA꞉

 

AERA is the specialized economic referee regulating the tariffs collected by private players under the Public-Private Partnerships (PPPs), from embarking & disembarking consumers. It ensures that they do not abuse the natural monopoly granted to them by the virtue of construction & management of the airports with annual passenger 92 traffic exceeding 3.5 million.


Its mandate is grounded in Section 13 of the Airports Economic Regulatory Authority of India Act, 2008. As per the provision, AERA is required to determine the tariff for aeronautical services by considering specific building blocks꞉ the capital expenditure (Capex) incurred, the quality of service provided, the cost of improving efficiency, and the revenue received from non-aeronautical services.

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92 Airports Economic Regulatory Authority of India, ‘Major Airports under Section 2 (i) of the AERA Act, 2008’ (Public Notice 03/2025-26, 8 May 2025).


AERA does not collect these tariffs; instead, it sets the price caps that airport operators, including AAI or private firms like GMR and Adani, must follow.


DGCA꞉

 

As of January 1, 2025, the DGCA operates under the Bharatiya Vayuyan Adhiniyam (BVA), 2024, which modernizes the regulatory regime and replaces the Aircraft Act of 1934. Under Section 10 of the BVA 2024, the Central Government is empowered to make rules for the regulation of air transport services. This includes the licensing of persons employed in aircraft operations, the certification of aerodromes, and the supply of air-route beacons.While the DGCA is primarily a safety regulator, Section 10 gives it a hand in the economic environment by requiring it to monitor the prices (i.e. tariffs) cited by airlines to the consumers under Rule 135 of the Aircraft Rules, 1937, to ensure transparency.

 

CCI꞉

 

CCI is mandated by the Competition Act, 2002 to promote and preserve competition and eliminate practices that have an Appreciable Adverse Effect on Competition (AAEC). Its primary tools for market regulation are Section 3, which prohibits anti-competitive agreements, and Section 4, which prohibits the abuse of a dominant position. The CCI holds exclusive jurisdiction over conduct that harms the competitive process, as its mandate is to  safeguard the market structure and consumer welfare rather than resolve private contractual disputes. Its mandate is cross-sectoral, applying to all industries and regulating the behavior of enterprises within them.

  

14.3 Sectoral Strategies towards Competition

 

Each sectoral entity uses its mandate to foster a specific type of competition. AAI uses it to foster competition for the market – that creates an airport run by an airport manager; AERA utilizes its mandate to regulate the natural monopolistic characteristics of an Airport Manager – by limiting the charges that can be levied by the airport manager on the consumers and customers; DGCA uses it to determine safety measures and regulate the facets that are un-regulated by AERA & AAI; & CCI, naturally, acts as the cross-sectoral guardian of competition, regulating the behaviour of the players inside the market.

 

AAI꞉

 

AAI fosters competition primarily through its role as the concessioning authority. By leasing airports under Section 12A, it invites global and domestic players to bid for the right to operate infrastructure And its recent strategy to bundle metro centers with regional areas - aims to establish a new paradigm for airport development.

 

In February 2026, the AAI initiated the third round of airport monetization, bundling five large airports (Amritsar, Varanasi, Bhubaneswar, Raipur,Tiruchirapalli) with six smaller ones (Kangra,Kushi nagar, Gaya, Hubli , Chhatrapat i 93 Sambhajinagar (Aurangabad), Tirupathi. This bundling strategy uses the revenue-generating potential of profitable hubs to cross-subsidize and modernize loss-making regional airports, ensuring that competition & development are not limited only to metro centers.

 

AERA꞉

Because airports are natural monopolies and the players under the PPP’s are prone to abuse such a power by charging extra-ordinary costs from the consumers and the airlines, AERA is essentially tasked to simulate competition where it naturally lacks.

It achieves this by setting a maximum allowable yield per passenger (calculated by the amount of money required as investment by the airport developer, profit divided by the total number passengers expected in the 5-year control period) and determining, out of the Maximum allowable yield per passenger, specific user development fee (paid by the user at the time of purchase) & aeronautical revenue / tariff (paid by the airline utilizing the services within a certain set of time).

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93 Airports Authority of India, ‘Bids for privatisation of 11 airports by April’ (Corporate Communications Directorate Press Clipping, 11 February 2026).

To ensure the charge levied on the airlines and users, it even adapts a ‘Hybrid till’ model wherein a portion (30%) of non-aeronautical revenue revenue—from retail, duty-free, and parking services inside the airport—are used to crosssubsidize and lower the aeronautical charges – charge for fuel, ground safety, cargo – collected by 95 airport managers.

 

This price ceiling by a regulator impacts competition in two ways꞉ Firstly, it ensures the Airport manager, who has the natural monopoly, to strategise development over the control period which will attract new consumers, airlines and nonaeronautical service providers.

 

Secondly, it improves inter-brand competition between different airport managers located closeby geographically. To illustrate, take the AERA’s decisions on the Noida International Airport (NIA). By proposing an ad-hoc User Development Fee 96 (UDF) ranging from ₹210 to ₹980, AERA ensured that NIA remains a cost-competitive alternative to Delhi’s IGI Airport, (which charges between ₹129 & ₹810) it introduced regional competition into the 97 NCR catchment area.

 

DGCA꞉

 

From the very outset, DGCA approaches regulation of aerospace and competition from a behavioural regulator point of view. The very fact that it 98 introduces the idea of aerodrome (the area, including all buildings and sheds, for the surface 99  ovement of aircrafts), and defines aircraft as a machine that can derive support in the atmosphere from reactions of the air is a clear indicator as to its objectives꞉ it’s not to regulate elements of competition inside this sector rather, it intends to regulate the very fundamental instruments of this sector.

 

To that extent, it sets safety standards of the aircrafts, determines conditions for provision of licenses & certification for air traffic control, dictates aircraft travel areas, lays down the 100 communication systems and many more.

 

Its power to interfere with the economics of competition comes from Section 10(2)(b) & 10(2)(f) of the BVA. Section 10(2)(b) allows DGCA to regulate any and every air transport services (including slot allocation inside airports) & Section 10(2)(f) allows DGCA to analyse and determine any fee that is not determined / regulated by AERA & AAI.

 

These two powers were seen in action in the recent months - during the Indigo Pilot Crisis and the ongoing issue of unbundling ancillary services.

 

Following the December 2025 operational collapse at IndiGo, the DGCA curtailed the airline’s winter schedule by 10%, leading to the vacation of 717 slots. These slots were then redistributed by a highlevel committee to capacity-ready rivals like Air India and Akasa Air, ensuring that a single dominant carrier cannot hoard infrastructure to the 101 detriment of market contestability.

 

On March 20, 2026, the DGCA issued a landmark circular mandating that airlines offer at least 60% of seats on every domestic flight without an additional selection fee. This move addressed "unbundling" practices that the regulator viewed as 102 a veil for predatory pricing.

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94 Rule 89, Aircraft Rules, 1937 & AERA (Terms and Conditions for Determination of Tariff for Airport Operators) Guidelines, 2011, Clause 5 and Clause 6.

95 A National Civil Aviation Policy (NCAP), 2016, Para 12(c) & AERA Order No. 14/2016-17.

96 AERA Consultation Paper No. 08/2025-26

97 AERA Order No. 07/2024-25 (dated March 28, 2025)

98 Bharatiya Vayuyan Adhiniyam 2024, s 2(1)

99 Bharatiya Vayuyan Adhiniyam 2024, s 2(3).

100 Bharatiya Vayuyan Adhiniyam 2024, s 10(2).

101 Ministry of Civil Aviation, ‘Formation of Coordination Committee for Redistribution of Vacated Airport Slots’ (Order, 22 January 2026).

102 Directorate General of Civil Aviation, ‘Mandatory 60% Free Seat Allocation on Domestic Flights’ (Air Transport Circular, 20 March 2026).

 

CCI꞉

 

While the DGCA, AAI, and AERA regulate the industry ex-ante (before a problem arises), the CCI acts ex-post as the cross-sectoral guardian of competition. It oversees a totally different layer by looking beyond sectoral rules to the actual effect of business conduct on the market.

 

The CCI’s primary role is to prevent the abuse of dominant position by an enterprise (Section 4 of the Competition Act, 2002). By its very nature, CCI stands as an overarching regulator to every sector including the civil aviation sector, regulating the behaviour of the enterprises inside the industry.

 

The defining competition case of 2026 was the CCI’s investigation into IndiGo. The watchdog took cognizance of allegations that the airline cancelled confirmed bookings during its December 2025 meltdown and then re-offered the same seats at significantly higher prices, creating an artificial 103 scarcity.

 

14.4 Conclusion

 

The " Regulatory Quartet " represents a sophisticated and collaborative framework that is successfully steering Indian aviation toward its ambitious Vision 2047. The period between January 2025 and March 2026 has showcased a remarkable synergy, where the AAI, AERA, DGCA, and CCI have demonstrated their ability to harmonize infrastructure development, economic fairness, safety standards, and market integrity.

 

However, this synergy faces institutional limitations. The DGCA's under-capacity, characterized by a 50% vacancy rate in technical posts, creates critical bottlenecks that inhibit market entry and contestability. Furthermore, the cross-sectoral nature of the CCI & the emerging digital markets means its attention is increasingly drawn toward emerging concerns in digital markets, potentially effecting its response time for crucial, sector-specific interventions in the highgrowth aviation sector.

 

As the sector continues its record-breaking expansion, one must reflect꞉ is this evolving interface already resilient enough to serve as the definitive global blueprint for multi-layered sectoral governance? By continuing to formalize their integration, these regulators are ensuring that India’s skies remain a theater of innovation, efficiency, and profound consumer welfare