Competition Commission Orders Investigation into IndiGo's December Meltdown
India's antitrust watchdog, the Competition Commission of India (CCI), has initiated a detailed investigation into whether IndiGo's conduct during its operational crisis in early December constituted an abuse of its dominant position as the country's largest airline. The probe will examine if the airline's actions, which led to widespread flight cancellations and a surge in airfares, violated competition laws.
December Crisis and Market Impact
During the first week of December, IndiGo experienced a severe operational meltdown, with scores of flights cancelled daily. Given that IndiGo commands a domestic market share of approximately 65%, this disruption brought India's aviation system to its knees. The crisis peaked between December 3 and 5, when 2,507 IndiGo flights were cancelled and another 1,852 were delayed. On December 5 alone, over 1,600 of the airline's 2,300-plus daily flights were cancelled.
The mass cancellations left thousands of passengers stranded at airports across the country and triggered a scramble for alternative tickets. This led to a significant surge in airfares across other airlines as well, prompting government intervention with distance-based fare caps to protect consumers.
CCI's Observations and Legal Framework
In its 16-page order issued on Wednesday, the CCI observed that IndiGo's cancellation of thousands of flights—constituting a substantial portion of its scheduled capacity—may have created an "artificial scarcity" of air travel options. This effectively limited consumer access during the peak travel season, potentially violating Section 4 of the Competition Act, which deals with abuse of dominant position.
The Commission noted that passengers who had booked tickets were left with no real choice but to accept last-minute cancellations and seek alternatives at significantly higher prices. Given IndiGo's dominant market position, consumers were effectively locked in with limited viable alternatives, raising concerns under Section 4(2)(a)(i) and Section 4(2)(b)(i) of the Competition Act.
The CCI emphasized that the disruptions were not isolated to specific routes but occurred simultaneously across IndiGo's extensive network, creating what it described as a "system-wide capacity shock." The investigation, which must be completed within 90 days, will examine how this conduct constrained consumers' access to domestic flights.
IndiGo's Defense and Regulatory Actions
IndiGo argued before the CCI that the Commission lacked jurisdiction in this matter, asserting that it should be handled exclusively by the Directorate General of Civil Aviation (DGCA), India's aviation regulator. However, the CCI rejected this argument, clarifying that while the DGCA oversees operational aspects, only the CCI is empowered to address anti-competitive practices under the Competition Act.
The DGCA has already taken action against IndiGo for the December disruptions, imposing penalties totalling Rs 22.20 crore on the airline and issuing warnings to its top management personnel. The crisis was primarily attributed to IndiGo's under-preparedness for the second phase of new rest and duty norms for pilots, which took effect on November 1.
IndiGo admitted to the DGCA that it faced a shortage of pilots relative to the requirements under the new Flight Duty Time Limitation (FDTL) rules. The situation stabilized only after the DGCA granted IndiGo a temporary exemption until February 10 from certain night duty-related changes in the FDTL norms. Since then, IndiGo's operations have returned to stability, with the airline now operating over 2,200 daily flights.
Market Dominance and Competitive Landscape
IndiGo's dominance in the Indian aviation market is substantial, with the airline operating on over 950 of the approximately 1,200 domestic routes in India. Notably, more than 600 of these routes are monopoly routes where IndiGo is the sole operator, and about 200 routes (21%) are duopoly routes with only one competitor.
Experts point out that while dominance itself is not anti-competitive, abuse of that position is. Abuse occurs when a company uses its market power in exclusionary or exploitative ways, such as through opportunistic pricing or denial of market access, which negatively impacts competition. The CCI can impose significant penalties if its investigation reveals abuse of dominant position, including fines of up to 10% of the company's average turnover over the past three years.
The CCI's order highlighted that the domestic passenger aviation market exhibits high and increasing concentration, allowing leading firms to operate independently of competitive forces due to constrained effective rivalry. This situation has been exacerbated by the failure of other domestic airlines to compete effectively or survive, with notable examples like Go First and Jet Airways ceasing operations in recent years.
As the investigation progresses, it will scrutinize whether IndiGo's actions during the December crisis crossed the line from operational failure into anti-competitive behavior, setting a precedent for how market dominance is managed in India's critical aviation sector.
