When Competition Failed Its Stress Test: The IndiGo Crisis and Regulation Beyond Conduct

The Market's Response

Competition law rests on the assumption that when the largest undertaking in a market falters, its rivals compete harder rather than following its failure upward. The disruption to IndiGo's operations in December 2025 tested that assumption, and the market failed it. Between 1 and 9 December 2025, IndiGo cancelled approximately 4,500 flights, with the government's own inquiry recording 2,507 cancellations and 1,852 delays in the worst three days alone, after failing to align pilot rosters with revised Flight Duty Time Limitation (FDTL) requirements. FDTL issued by the Directorate General of Civil Aviation (DGCA) governs pilot fatigue and rest, introduced to satisfy India's ICAO Annex 6 obligations. IndiGo carries close to two-thirds of India's domestic passengers. More than a million passengers were affected. The most revealing part of the episode was not the disruption itself, but how the rest of the market responded to it.

Rather than competing for stranded passengers, rival carriers raised fares. Air India reportedly charged close to ₹60,000 for Delhi–Mumbai flights, and fares on some corridors exceeded ₹90,000. The competitive response economic theory predicts never materialised; rivals moved in the same direction as the firm they might have been expected to discipline. Government intervened where the market did not. Fare caps followed on 6 December 2025, setting a price ceiling of ₹7,500 for routes up to 500 km rising to ₹18,000 beyond 1,500 km, alongside waived rescheduling charges and dedicated refund mechanisms, staying in force until the Ministry's own order declared the sector stabilised and withdrew them with effect from 23 March 2026.

Why the Fare Surge Escaped Competition Law

Why did a market served by several airlines generate no competitive discipline when its largest participant ceased to function, leaving executive regulation, not competition law, to respond? The answer lies in the Act's institutional design. Section 4 addresses abuse by a dominant undertaking; the carriers that raised fares alongside IndiGo were individually unlikely to meet that threshold. Section 3 distinguishes unlawful coordination from lawful parallel conduct. A sudden contraction in capacity, coupled with inelastic demand, gives each carrier an independent incentive to increase fares without that parallel response, by itself, amounting to an agreement.

This is unsurprising. Competition law was never built to regulate every price rise following a supply shock. But the crisis exposed something more troubling than one lawful price increase i.e. a market that, despite multiple nominal competitors, proved incapable of the discipline expected when its largest undertaking failed. Competition Act 2002 identifies discrete infringements well; it is far less suited to asking whether market structure itself has grown insufficiently resilient.

CCI's Narrower Inquiry

The Competition Commission of India (CCI) approached the episode differently. In Kartikeya Rawal v. InterGlobe Aviation Ltd, Case No. 44 of 2025, the Commission formed a prima facie view on 4 February 2026 that IndiGo's cancellations warranted investigation under Sections 4(2)(a)(i) and 4(2)(b)(i) of the Competition Act, 2002  including unfair conditions, and unjustifiable limitation of services. IndiGo argued the matter belonged before DGCA, which had already opened proceedings into the same failures; the Commission rejected this, citing the Supreme Court's reasoning in CCI v. Bharti Airtel Ltd that a sectoral regulator's existence does not oust competition scrutiny where the two statutes serve distinct objectives.

Even if abuse is ultimately established, it would answer only part of the story. For now, IndiGo has instead offered commitments to the CCI, including a Crisis Management Group to be constituted within 15 minutes of any ‘large-scale disruption’, defined as affecting more than 30% of its planned daily capacity. CCI has invited public comments on the proposal until 13 August 2026.

Market Resilience and Institutional Failure

The limitations of the CCI's inquiry point to a broader institutional question. CCI acted with unusual speed, opening an internal review within roughly ten days, well before any complaint. The harder question, however, is why a market this concentrated existed to be disrupted at all. Competition law prohibits abuse of dominance, not dominance itself, and IndiGo never became India's largest carrier through acquisitions that would trigger merger scrutiny; its position grew organically, never crossing a chokepoint built to catch it. The competitive fringe thinned alongside it. Jet Airways exited in 2019, Go First entered insolvency in 2023, and the Air India–Vistara merger consolidated the field further. By December 2025, India had a market with several airlines in form but two in substance, a duopoly structure CCI's toolkit was never positioned to see coming, since its powers reach transactions and abuse, not accumulation. Such a market is not resilient by construction; December 2025 was simply the first shock large enough to expose it. Tellingly, the crisis did not reverse the trend. DGCA's own data put IndiGo's share at a record 66.3% by June 2026.

CCI was not without a tool capable of identifying these structural concerns earlier. Independently of its enforcement powers, which require potentially infringing conduct, the Commission may initiate market studies on its own initiative to examine how markets function. It has previously exercised this power in sectors such as e-commerce (2020) and taxi and cab aggregation (2022), without waiting for a complaint or enforcement action. There was little to prevent similar scrutiny of India's increasingly concentrated aviation sector as successive exits and mergers steadily reshaped the market.

A Regulator Held to Ransom by Its Own Dominant Undertaking

DGCA's subsequent response sharpens this further, and bears directly on competition, not just safety. Having found IndiGo in breach of the very rules meant to prevent this crisis, it granted the airline a temporary relaxation from specific FDTL provisions, later confirmed to have concluded on 10 February 2026. The Airline Pilots' Association of India objected in writing, citing a meeting with DGCA on 24 November 2025 at which the regulator had reportedly agreed no dispensation ‘motivated by commercial interests’ would go to any operator, making the exemption a documented departure from that assurance, on the union's account, not a pattern inferred after the fact. The competitive dimension is just as telling. While IndiGo sought relief, SpiceJet's chairman confirmed it was running 100 additional flights to absorb IndiGo's stranded passengers. A rival had, thus, absorbed the same transition without a comparable collapse. DGCA's inquiry attributed the crisis specifically to IndiGo's ‘over-optimisation of operations,’ and publicly called the airline solely responsible. A carrier that absorbed the true cost of compliance gained no competitive advantage for it; the carrier that did not was relieved of that cost by its own regulator and resumed growing its market share within months. This is regulatory capture of an unusual kind, achieved through systemic weight rather than influence. Once an undertaking's operation is itself a matter of public necessity, the regulator's room to enforce compliance against it narrows, whether or not pressure is deliberately applied.

Toward Structural Remedies

The policy debate that followed appears to recognise this. The Ministry of Civil Aviation granted No Objection Certificates to three new carriers namely Shankh Air, Al Hind Air and FlyExpress explicitly linking it to concentration concerns. Separate reports that the government is weighing airport-operator ownership rules reflect the same shift, away from fixing incumbent behaviour and toward market structure. Whether every proposal is desirable is beside the point. Some, particularly those involving airport operators entering the airline market, raise conflict-of-interest concerns. The broader shift in focus is nevertheless correct, in that, a behavioural remedy directed at one dominant undertaking cannot resolve a market in which too few undertakings remain to constrain it.

Other jurisdictions have developed tools for addressing structural competition problems before they crystallise into enforcement cases. The UK's market investigation regime allows the Competition and Markets Authority to examine whether features of a market, rather than the conduct of any particular firm, adversely affect competition and to impose binding structural remedies without first finding an infringement. The regime, created under the Enterprise Act 2002, was recently strengthened by the Digital Markets, Competition and Consumers Act 2024. The BAA airports investigation provides a useful illustration. In 2009, the UK ordered BAA to divest Gatwick and Stansted and a Scottish airport, purely because common ownership of the country's busiest airports was distorting competition system-wide with no wrongdoing required, just a structural finding. The UK also closes the cross-regulator gap this piece has described. The Civil Aviation Authority holds competition powers concurrently with the CMA, so a single institution can see both a compliance decision and its competitive fallout at once, rather than leaving DGCA and CCI to encounter each other only when litigated. India has neither instrument; CCI's market-study power, unlike a market investigation reference, cannot compel a remedy at the end of it, only recommend one.

Conclusion

CCI's investigation is justified and necessary, but its significance extends beyond whether IndiGo abused its dominance under Section 4. The more enduring lesson is that competition law entered the story only after the market had already failed its most important test. A market where one undertaking's temporary disruption triggers widespread harm, emergency price controls, and system-wide instability raise questions not just about conduct, but about structural resilience and whether competition law intervened too late to matter.

CCI already possesses a valuable, if underutilised, power to conduct market studies without waiting for a complaint. What it lacks is the ability to translate those findings into binding structural remedies. The IndiGo episode suggests that stronger competition policy is not simply about more vigorous enforcement after a crisis, but about equipping institutions to identify and, where appropriate, address the structural vulnerabilities that make such crises possible in the first place.