NOC Reality Check: New Airlines Face Major Hurdles Despite Government Approval
While the Civil Aviation Ministry approved NOCs for three new airlines in 2024 to challenge market concentration, all remain non-operational due to significant financial barriers including massive security deposits and bank guarantee requirements from aircraft lessors wary after the Go First bankruptcy case.
*this image is generated using AI for illustrative purposes only.
The Ministry of Civil Aviation has granted No Objection Certificates (NOCs) to three new airlines in 2024 - Al Hind Air, FlyExpress, and Shankh Air - in a strategic move to introduce more competition in India's highly concentrated aviation sector. However, securing an NOC is only the first regulatory step, and the reality on the ground reveals significant challenges that prevent these airlines from actually taking to the skies.
New Airlines Approved But Non-Operational
Civil Aviation Minister Ram Mohan Naidu announced the approvals following recent meetings with teams from the aspiring airlines. The three new carriers represent a diversification effort in India's aviation landscape, where InterGlobe Aviation and the Air India Group together control 90.00% of the domestic market.
| New Airline Status: | Details |
|---|---|
| Air Kerala: | First to receive NOC in 2024, Kerala-based |
| Shankh Air: | UP-based, secured NOC in 2024 |
| Al Hind Air: | Fresh NOC after separate entity registration |
| FlyExpress: | Latest entrant, South India-based |
| Operational Status: | All remain non-operational |
| Target Launch: | Mid-2025 (no confirmed timeline) |
Despite the government approvals, all three airlines remain non-operational. While these startups initially targeted a launch around mid-2025, none has a confirmed timeline to begin commercial operations due to substantial operational and financial hurdles.
The Aircraft Leasing Roadblock
The primary challenge facing these new airlines is aircraft acquisition, which requires significant upfront capital and regulatory clearances. To actually launch operations, airlines need two critical requirements beyond the NOC: aircraft and an Air Operator Permit (AOP) from the Directorate General of Civil Aviation.
| Financial Requirements: | Amount |
|---|---|
| Security Deposit Demanded: | ₹100.00 crore |
| Bank Guarantee Requirement: | ₹500.00 crore |
| Setup Costs Already Spent: | ₹30.00 crore+ |
| Purpose of Setup Costs: | Offices and key personnel hiring |
According to a startup airline promoter, aircraft lessors are demanding around ₹100.00 crore as security deposit and proof of nearly ₹500.00 crore in bank guarantees. For startups without an operating history, raising that level of capital upfront is extremely difficult, leading them to seek government backing or support to enhance credibility with global lessors.
Market Concentration Concerns Persist
The push for new airlines addresses growing concerns about market concentration in India's domestic aviation sector. IndiGo alone holds 65.60% market share, carrying over 91.00 lakh passengers, while Air India Group controls 25.70% with 36.00 lakh passengers. SpiceJet, the third major carrier, holds a distant 2.60% market share with only 3.62 lakh passengers.
| Current Market Share: | Details |
|---|---|
| IndiGo Market Share: | 65.60% |
| Air India Group Share: | 25.70% |
| SpiceJet Share: | 2.60% |
| Combined Duopoly Control: | 90.00% |
| IndiGo Passengers: | 91.00 lakh |
| Air India Passengers: | 36.00 lakh |
Lessor Wariness After Go First Bankruptcy
The caution among aircraft lessors stems from recent history, particularly the Go First bankruptcy case. During Go First's bankruptcy proceedings, aircraft lessors were locked in prolonged legal battles with banks and other stakeholders, as planes could not be repossessed due to pending airline dues. This episode has reinforced the perception that leasing aircraft to Indian airlines carries heightened legal and financial risk, especially for startups.
While the government's intent to encourage more airlines is clear through NOC approvals, the challenges facing new entrants remain structural. India does not lack aspiring airlines, but it faces a shortage of aircraft access, capital, and lessor confidence. Until these fundamental issues are addressed, an NOC remains just a document rather than a takeoff clearance, highlighting the gap between regulatory approval and operational reality in India's aviation sector.
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