When one company is the be-all and end-all, the humongous cost is borne by everyone else. Monopolies may promise stability, but they often deliver fragility the moment things go wrong.
This philosophy has been strongly foregrounded during the IndiGo crisis.
A news report has presented some bare facts.
IndiGo dominates India’s aviation sector. It carries six out of every 10 domestic air passengers and is, for all practical purposes, too big to fail.
IndiGo’s hold on the market is stronger than its nearly 65 per cent domestic share by passenger volumes.
India’s aviation sector now functions like a duopoly, with the Air India group holding a 26.5 per cent market share as of October, the report mentions.
A large share of IndiGo’s routes are monopoly routes where only its blue tails fly. Together, IndiGo and the Air India group have more than 90 per cent of the domestic market, making aviation the most concentrated sector in India.
Indian airlines operate about 1,200 domestic routes. IndiGo flies more than 950 of them. Nearly 600 routes (63 per cent) are monopoly routes, and around 200 routes (21 per cent) are duopoly routes where IndiGo has just one competitor.
These figures are from aviation analyst and former network planner Ameya Joshi. He also noted that RCS routes are often monopoly routes by design, led mostly by Alliance Air, and that IndiGo’s own monopoly routes are not tied to the RCS.
Price of dominance by one player
Much of IndiGo’s dominance comes from other airlines failing to compete or survive. Many carriers have collapsed over the past two decades, with Go First and Jet Airways being the most recent big examples, the report highlights.
A dominant airline also keeps certain routes alive that might otherwise shut down, leaving passengers with one-stop options. Until this crisis began, IndiGo was known for operational efficiency and a clean safety record in India’s uneven aviation landscape.
IndiGo is now returning to more stable operations step by step. Temporary exemptions from the sector regulator helped because the disruption was so large. But the last week has shown the risks of high market concentration. The aviation establishment has taken note. Civil Aviation Minister K Rammohan Naidu reportedly told Parliament that the country needs five big airlines due to fast-growing air travel demand.
This crisis is a wake-up call beyond aviation. As the report aptly outlines, several sectors (telecom, cement, steel, private ports, private airports, and parts of e-commerce) have seen rising market concentration in recent years. The IndiGo episode highlights how monopolies and duopolies can expose weaknesses fast.
Entry barriers
Experts say strong and stable companies can support efficiency and competitiveness, but they also warn that problems start when one or two players grow so large that they crowd out others and create high entry barriers. Some of this is how the market evolved, but the impact remains heavy.
Joshi reportedly said that monopolies may look harmful at a country level but are useful at route level in aviation. He also said many routes would not exist without IndiGo and that the airline gained its monopoly status because it survived while others did not. He argued that monopoly and duopoly markets should have stricter penalties to make companies more aware of the responsibility that comes with dominance.
The general opinion is that market dominance itself is not the problem and that issues arise only when dominance is abused. Heavy concentration still discourages new entrants because they feel policies favour existing players. Industry observers believe that concentration driven by acquisitions creates concern that dominant businesses will eventually swallow others.
Immediate effects
Such a skewed share of business is worrying. Aviation is customer-facing, so the effects are immediate. High concentration creates systemic risk if dominant players falter. It limits consumer choice, can push prices up, and weakens innovation and quality.
The lessons matter for policy makers. Market concentration keeps rising across major industries as top players expand through acquisitions and organic growth.
Further, the Herfindahl-Hirschman Index (HHI), which measures concentration, has been increasing in telecom, airlines, cement, steel and tyres.
The HHI, the news report elaborates, tracks the size distribution of firms in a market. It rises when the number of firms shrinks or when size gaps widen. Markets with HHI between 1,000 and 1,800 are moderately concentrated. Markets above 1,800 are highly concentrated. Aviation, telecom, steel and paints in India have HHI values above 1,800, according to industry estimates presented in the report.
The report also alludes to a 2023 working paper on Industrial Concentration in India. It notes that concentration of economic power is often criticised because of its social and political effects. It also says concentration can provide the scale needed to compete in international markets.
So, while market strength is useful, balance is what keeps an industry steady when pressure hits.
Also Read: IndiGo Crisis Deepens: Over 450 Flights Cancelled As Disruptions Enter Day 7 https://www.vibesofindia.com/indigo-crisis-deepens-over-450-flights-cancelled-as-disruptions-enter-day-7/
