Over the last two decades, India’s civil aviation sector has undergone a remarkable transformation, driven by economic liberalisation, increased private sector participation, growing passenger demand, and sustained investment in airport infrastructure. Today, India is recognised as one of the world’s fastest-growing aviation markets, supported by a rapidly expanding middle class, rising disposable incomes, and government initiatives aimed at strengthening regional and international connectivity. The sector’s growth has significantly improved connectivity, promoted trade and tourism, generated employment, and contributed to the country’s economic development. At the same time, the domestic airline industry has evolved into a highly concentrated market, where a limited number of airlines account for a substantial share of passenger traffic. Such a market structure is commonly described as an oligopoly.
An oligopolistic market is not inherently anti-competitive. However, the presence of a small number of dominant market participants creates conditions where airlines closely monitor one another’s pricing, capacity, route networks, and commercial strategies. This raises important competition law concerns, particularly where independent commercial conduct may be misunderstood for unlawful coordination.
One of the most significant concerns in such markets is cartelisation. A cartel involves an agreement or understanding between competing enterprises to coordinate their commercial conduct, such as fixing prices, allocating markets, restricting capacity, or rigging bids. These arrangements undermine competition by reducing consumer choice, increasing prices, and discouraging innovation. Consequently, the Competition Commission of India (CCI) plays a crucial role in preserving competitive markets while recognising that similarities in commercial behaviour may legitimately arise from common economic factors such as fluctuations in aviation turbine fuel (ATF) prices, seasonal demand, airport charges, or taxation. Accordingly, parallel pricing alone does not amount to cartelisation unless it is supported by evidence of an agreement or concerted practice.
Competition Law and India’s Aviation Sector
The liberalisation measures introduced during the early 1990s transformed India’s aviation industry by encouraging private sector participation and increasing competition among airlines. While these reforms improved connectivity and consumer choice, they also gave rise to competition law issues relating to pricing, airport slot allocation, route allocation, market concentration, and barriers to entry.
The primary legislation governing anti-competitive conduct in India is the Competition Act, 2002, as amended by the Competition (Amendment) Act, 2023. The Act seeks to prevent practices having an appreciable adverse effect on competition (AAEC), promote and sustain competition, protect consumer interests, and ensure freedom of trade. The CCI is the statutory authority responsible for enforcing the Act. Its role is distinct from that of the DGCA, which regulates aviation safety, airworthiness, licensing, and operational standards. While the DGCA oversees the technical and operational aspects of civil aviation, issues concerning anti-competitive conduct fall within the jurisdiction of the CCI. Among the other provisions of the Competition Act most relevant to the aviation sector are Sections 3 and 4.
Section 3 of the Competition Act, 2002 prohibits agreements between enterprises that cause or are likely to cause an appreciable adverse effect on competition within India. In the context of the aviation sector, this provision prohibits competing airlines from entering into agreements relating to price-fixing or coordinated fare increases, allocation of routes or geographical markets, restrictions on seat capacity or flight frequency, bid-rigging or collusive bidding, or any other arrangement intended to restrict or eliminate competition. Such horizontal agreements are presumed to have an appreciable adverse effect on competition unless the parties are able to rebut the statutory presumption in accordance with law.
Unlike Section 3, Section 4 does not prohibit an enterprise from holding a dominant position in the market. Instead, it prohibits the abuse of such dominance. An airline may contravene this provision where it exploits its market power by imposing unfair or discriminatory prices or conditions, denying market access to competitors, engaging in predatory pricing, or otherwise using its dominant position in a manner that adversely affects competition. Accordingly, market concentration or dominance, by itself, does not amount to a violation of the Competition Act. Liability arises only where a dominant enterprise abuses its position in a manner prohibited under Section 4.
Cartelisation and the Oligopolistic Nature of India’s Aviation Market
An oligopoly is a market structure in which a relatively small number of enterprises collectively account for a substantial share of the market. Since each participant possesses significant market influence, the commercial decisions of one airline often affect the strategies adopted by its competitors. As a result, airlines operating in an oligopolistic market tend to monitor one another’s pricing, capacity, and network expansion more closely than businesses operating in highly competitive markets.
India’s domestic aviation market displays several characteristics commonly associated with an oligopoly. A limited number of airlines dominate passenger traffic, while significant barriers to entry including substantial capital investment, regulatory approvals, airport slot constraints, and high operating costs, make it difficult for new entrants to compete effectively.
However, the existence of an oligopoly does not, by itself, establish cartelisation. Competition law recognises that airlines operating under similar economic conditions may independently adopt comparable commercial strategies. This phenomenon, commonly referred to as conscious parallelism, occurs when competing enterprises respond similarly to market forces without any communication or agreement between them.
For instance, competing airlines may simultaneously increase fares following a sharp rise in ATF prices or airport charges. Although the outcome appears similar, such pricing decisions may simply reflect independent commercial responses to identical economic conditions. Therefore, parallel conduct cannot, by itself, be treated as evidence of cartelisation.
Nevertheless, oligopolistic markets require greater regulatory scrutiny because their structural characteristics may facilitate coordination among competitors. A limited number of participants, repeated commercial interactions, and a high degree of market transparency can make coordinated conduct easier to sustain if competitors choose to act collectively. Consequently, competition authorities must carefully distinguish between lawful conscious parallelism and unlawful collusion.
Factors Facilitating Cartel Formation in Oligopolistic Markets
Although cartelisation remains prohibited under the Competition Act, certain structural characteristics of the aviation industry may increase the likelihood of coordinated conduct.
First, the domestic airline market is characterised by a relatively high degree of concentration. With only a few major competitors, airlines can easily observe each other’s pricing strategies, capacity decisions, and route expansions.
Secondly, airfare information is publicly available through airline websites and online booking platforms, creating significant pricing transparency. While transparency benefits consumers, it also enables competitors to monitor changes in fares and respond quickly to market developments. Importantly, pricing transparency is not unlawful; competition concerns arise only where it is accompanied by evidence of coordination or communication between competing airlines.
Thirdly, although airlines differentiate themselves through customer experience, loyalty programmes, and ancillary services, the core service they provide the transportation of passengers, is largely comparable. Consequently, competition often centres on pricing, operational efficiency, network connectivity, and service quality.
Finally, airlines compete with one another over extended periods, allowing them to anticipate competitors’ responses to commercial decisions. Such repeated market interaction may create conditions conducive to coordinated behaviour. However, competition law does not prohibit businesses from responding to publicly available market information or adopting similar commercial strategies independently. Liability arises only where there is evidence of an agreement or concerted practice that restricts competition.
Liability of Indian Airlines for Cartelisation
The liability of airlines for cartelisation is determined primarily under Section 3 of the Competition Act, 2002, which prohibits anti-competitive agreements between enterprises. The Act defines a cartel as an association of producers, sellers, distributors, traders, or service providers who, by agreement among themselves, limit, control, or attempt to control the production, distribution, sale, or price of goods or the provision of services. In the aviation sector, airlines may therefore incur liability where they enter into an agreement, arrangement, or understanding that restricts competition within the relevant market.
Cartelisation in the aviation industry may take several forms. These include coordinated fare increases, allocation of routes or geographical markets, restrictions on seat capacity or flight frequency to maintain artificially high fares, bid-rigging, or any other coordinated commercial strategy designed to reduce competition. Such arrangements reduce competitive pressure and may result in higher fares, fewer choices, and diminished incentives for innovation.
However, proving cartelisation in the aviation industry presents significant evidentiary challenges. Airlines frequently respond in similar ways to common market conditions such as fluctuations in ATF prices, airport charges, taxation, seasonal demand, exchange rate movements, and operational costs. As a result, similar pricing decisions or commercial strategies may emerge independently, without any communication or agreement between competing airlines.
As discussed above, conscious parallelism refers to independent commercial conduct by competing enterprises responding to similar market conditions. Conscious parallelism refers to a situation where competing enterprises independently adopt similar commercial strategies after observing the same market conditions or publicly available information. Such conduct, by itself, does not constitute cartelisation. Liability under Section 3 arises only where there is credible evidence demonstrating an agreement, understanding, or concerted practice between competitors that restricts competition.
Accordingly, the burden on the CCI extends beyond merely identifying similarities in pricing or market behaviour. The Commission must determine whether such conduct is the result of independent commercial decision-making or an unlawful agreement between competitors. In doing so, it may rely on both direct and circumstantial evidence, including internal correspondence, electronic communications, minutes of meetings, trade association interactions, market behaviour, and other surrounding circumstances capable of establishing collusion.
The CCI’s Approach to Allegations of Cartelisation
Given the structural characteristics of the aviation industry, the CCI has consistently adopted a cautious and evidence-based approach while examining allegations of cartelisation. The Commission has repeatedly emphasised that the existence of similar commercial conduct cannot, by itself, establish the existence of a cartel. Instead, the decisive consideration is whether there is evidence of communication, coordination, or a meeting of minds between competing enterprises.
This approach reflects a fundamental principle of competition law: enterprises remain free to make independent commercial decisions, even where those decisions resemble the strategies adopted by competitors facing similar economic conditions. Competition law seeks to prohibit collusion—not competition itself. Consequently, the Commission carefully distinguishes between legitimate market responses and coordinated conduct that undermines competition.
A notable illustration of this approach is found in Kannadiputhur Sundararaman Suresh v. InterGlobe Aviation Ltd. & Others. In the aforesaid, allegations were made that several leading airlines had adopted similar pricing practices amounting to cartelisation in violation of Section 3 of the Competition Act. Upon examining the material placed before it, the CCI observed that similarity in ticket prices, by itself, was insufficient to establish the existence of a cartel. The Commission recognised that airlines often respond independently to identical economic factors, including fuel costs, operational expenses, taxation, and passenger demand, which may naturally result in similar pricing patterns.
The CCI further held that, in the absence of evidence demonstrating communication, exchange of commercially sensitive information, or any other concerted practice between competing airlines, allegations of cartelisation could not be sustained merely because multiple airlines had adopted comparable pricing strategies. The decision reinforces the principle that parallel pricing is not synonymous with collusion, and that liability under Section 3 arises only where there is evidence of an agreement or coordinated conduct between competitors.
Consequences of Cartelisation Under the Competition Act
In the cases where the CCI concludes that airlines have entered into an anti-competitive agreement prohibited under Section 3, it may exercise the powers conferred upon it under Section 27 of the Competition Act, 2002. These powers include directing the parties to discontinue and desist from the anti-competitive conduct, declaring the offending agreement void to the extent contemplated under the Act, imposing monetary penalties in accordance with the statutory framework, and issuing such further directions as may be necessary to restore competitive conditions within the market.
Since direct evidence of collusion is often unavailable, the Commission may rely upon circumstantial evidence, documentary records, electronic communications, patterns of commercial conduct, and other surrounding circumstances while determining whether a cartel exists. Nevertheless, any finding of cartelisation must ultimately be supported by cogent evidence demonstrating an agreement or concerted practice between competitors. This balanced approach enables the Commission to effectively deter anti-competitive conduct while ensuring that legitimate business decisions are not incorrectly characterised as unlawful collusion.
Conclusion
India’s aviation sector has emerged as one of the country’s most significant drivers of economic growth, improving regional and international connectivity, facilitating trade and tourism, and creating substantial employment opportunities. As the sector continues to expand, maintaining a competitive and transparent market assumes even greater importance.
The concentrated nature of the domestic airline industry undoubtedly presents unique competition law challenges. However, the existence of an oligopolistic market does not, by itself, imply cartelisation or any other form of anti-competitive conduct. An oligopolistic market does not necessarily indicate coordinated conduct, as competing airlines may lawfully adopt similar commercial strategies in response to common market conditions.
Against this backdrop, the role of the Competition Commission of India assumes particular significance. By carefully distinguishing legitimate commercial conduct from prohibited collusion, the Commission seeks to preserve competitive markets while respecting the commercial autonomy of market participants. Its evidence-based approach ensures that airlines are held accountable only where there is credible material demonstrating an agreement or concerted practice that restricts competition.
As India’s aviation industry continues to witness sustained growth, effective enforcement of competition law will remain essential to preserving market efficiency, encouraging innovation, and maintaining consumer confidence. Ultimately, a balanced regulatory framework that promotes fair competition while preserving commercial independence will be essential to ensuring the long-term sustainability, efficiency, and global competitiveness of India’s civil aviation sector.
Author: Shyamli Shukla, Senior Associate
