A wave of flight cancellations by IndiGo, India’s largest airline, sparked a week of chaos and grounded tens of thousands of passengers, exposing the risks of a duopoly-like situation in the world’s fastest-growing aviation market.
For years, IndiGo, with a 65% domestic market share, has helped Indians realize their dream of flying, an aspiration shared by Prime Minister Narendra Modi, who once said that “those who go in slippers should also see themselves on airplanes.”
The airline became the poster child for the country’s aviation boom in recent years, with its promise of low fares and punctuality.
But last week everything changed: IndiGo canceled at least 2,000 flights due to a shortage of pilots after it failed to properly plan for new rules limiting the number of hours they work. That disrupted vacation and wedding plans and flooded social media with photos and videos of luggage piling up in terminals, scenes never seen before in the history of Indian aviation.
IndiGo’s problems come at a critical time for the airline and the industry. Rival Air India, which controls a 27% market share and was owned by the government until 2022, has faced complaints of an aging fleet and poor service for years, and is fighting tighter scrutiny since a crash in June killed 260 people.
IndiGo has said it hopes to return to normal in the coming days, but its problems have drawn warnings from politicians and aviation experts alike. The crisis has raised concerns about the risks of over-reliance on a single airline and whether the airline is really too big to fail.
The government quickly intervened and relaxed rules on managing pilot fatigue to ease the disruptions. IndiGo has repeatedly apologized but has not disclosed financial losses arising from the crisis.
“IndiGo’s size has grown to the point where operational setbacks pose systemic risk,” said Harsh Vardhan, president of Starair Consulting.
If IndiGo or Air India get into “trouble, there will be chaos in Indian aviation…the government needs to reduce taxes on jet fuel and encourage more competition,” he added.
IndiGo’s dominance in India
In a few countries, such as Australia and Canada, airline duopolies exist. Even China, the world’s second most populous nation, has three state-owned and several private airlines.
India’s aviation market is not a duopoly in the strictest sense, but analysts say the 92% market share of IndiGo and Air India – including its low-cost airline Air India Express – means it is a duopoly-like situation and creates vulnerabilities.
On many routes connecting smaller cities, IndiGo has a monopoly.
“A country cannot grow strongly with effective duopolies or monopolies in any sector,” GR Gopinath, founder of the now-defunct low-cost airline Air Deccan, wrote in a weekend editorial in the Economic Times newspaper.
Despite the government’s efforts to expand airports and simplify operating rules, few airlines have succeeded. High taxes, fierce competition and supply chain problems have driven airlines such as Kingfisher, Jet Airways and Go First into bankruptcy in recent years.
IndiGo did not respond to a Reuters request for comment. On Sunday, it said it was on track to operate more than 1,650 flights and expressed confidence that operations would stabilize by Wednesday.
IndiGo’s rapid rise
Modi spoke of his ambitions for India’s aviation sector at the global airline conference in New Delhi this year, but that vision depends primarily on the success of IndiGo and Air India.
About 174 million passengers traveled to and within India by air in 2024, up 10% from a year ago, according to data from the International Air Transport Association.
Founded in 2006 by Indian entrepreneurs Rakesh Gangwal and Rahul Bhatia, IndiGo has grown rapidly. It now has a fleet of more than 400 aircraft, mostly Airbus A320s, and serves nearly 380,000 customers a day through its more than 2,000 daily flights.
The airline is headed by CEO Pieter Elbers, former head of KLM Royal Dutch Airlines.
“This appears to be the lowest point in the company’s history. The disruptions are damaging the brand image,” said an IndiGo executive, who did not want to be identified due to the sensitivity of the matter.
With $9 billion in revenue and $807 million in profit last fiscal year, IndiGo dominates India’s aviation sector. Its annual revenue is likely to take a hit due to the disruptions: As of Sunday, customer refunds already reached $68 million and are expected to rise.
But the biggest blow will be to its reputation, built over years of making punctuality a key selling point.
In a 2011 IndiGo YouTube commercial, pilots and other staff sang in unison: “Every time we fly, we’ll make sure you land on time.”
The airline had an average on-time performance of 91.4% in July, the best among Indian airlines at six major airports. However, on Friday, that figure fell to just 3.7%.
The crisis is reminiscent of Southwest Airlines’ holiday season collapse in 2022, which caused 16,900 flights to be canceled and left more than 2 million passengers stranded. Those disruptions cost the U.S. airline at least $400 million in revenue.
