Can New Indian Airlines Break IndiGo, Air India Duopoly Amid Major Challenges?

The Indian government has granted No Objection Certificates (NOCs) to three aspiring carriers: Kozhikode-based Alhind Air, Hyderabad-headquartered FlyExpress, and Uttar Pradesh-based Shank Air. This move follows recent operational disruptions at India’s largest domestic carrier, IndiGo, and signals a push to challenge the market's entrenched duopoly. However, aviation professionals are highly skeptical that these new entrants can effectively compete against the dominant players.

The Dominance of the Duopoly

Experts argue the new airlines cannot break the market concentration. The domestic aviation sector is overwhelmingly controlled by IndiGo and the Air India Group (Air India and Air India Express). Together, these two entities command over 90% of the domestic market share. IndiGo alone holds more than 64% of the market as of late 2025 and operates a massive fleet of around 434 aircraft.

In contrast, the new entrants plan to start small. Alhind Air intends to begin operations with two ATR 72-600 aircraft, focusing on regional routes like Thiruvananthapuram-Kochi-Kozhikode. Shank Air plans to begin operations in the first quarter of 2026. FlyExpress is also targeting regional and Tier-2/Tier-3 city connectivity.

Critical Hurdles for New Entrants

Aviation professionals cite severe, systemic challenges that threaten the financial sustainability of the new carriers. Captain C. S. Randhawa, President of the Federation of Indian Pilots, stated that these airlines lack sufficient funding and expertise. He noted that no regional airlines have survived long-term on non-UDAN routes in India.

• Financing and Fleet: New airlines face immense challenges in securing financing and aircraft leasing. The dominant carriers control the supply of narrow-body jets like the Airbus A320. One pilot association representative noted it would take the new airlines at least two decades to reach the fleet size of the major players.
• Pilot Shortage: Training pilots specifically for ATR or smaller aircraft can take over eight months. The scarcity of qualified captains remains a major operational bottleneck.
• Regulatory Roadblocks: While the carriers have the NOC, they are still struggling to obtain the crucial Air Operator Certificate (AOC) from the Directorate General of Civil Aviation (DGCA). Alhind Air, for instance, has reportedly faced significant financial strain due to these prolonged delays.

Policy and Cost Environment

High operating costs are the single largest threat to new airlines. Aviation Turbine Fuel (ATF) accounts for approximately 40% of an airline's expenses.

• ATF and GST: Industry leaders are urgently calling for the government to bring ATF under the Goods and Services Tax (GST) regime. Currently, ATF is subject to an 11% central excise duty and varied state Value Added Tax (VAT) rates, which can be as high as 29%. This dual taxation prevents airlines from claiming input tax credits, inflating operational costs. As of late 2025, the GST Council has not yet made a recommendation to include ATF under GST, leaving the high tax burden in place.
• UDAN Scheme: The government continues to support regional connectivity through the UDAN (Ude Desh Ka Aam Nagrik) scheme, which offers subsidies for flights to underserved airports. The scheme is being modified to connect 120 new destinations over the next decade. This is the primary lifeline for regional carriers, including the proposed routes for Alhind Air and FlyExpress.

Despite the challenges, the entry of new players is viewed positively by some, like Air Deccan pioneer Captain G. R. Gopinath. He suggests that permitting new airlines is good for the country as it promotes a more vibrant industry and helps keep airfare prices in check for the public. For the latest commercial aviation news, visit flying.flights.

Outlook for Regional Carriers

History shows the difficulty of this market. The average life of a regional airline in India is estimated to be only three to seven years. Carriers starting with only one or two aircraft often fail in prolonged operations. The success of Alhind Air, FlyExpress, and Shank Air will depend less on initial enthusiasm and more on securing long-term funding, efficient operations, and crucial government policy reforms like the inclusion of ATF under GST.