India’s Airport Retail Loot: How Flyers Pay for a Broken System
IGI Airport, New Delhi. photo credit twitter @DelhiAirport
Overpriced coffee and water at Indian airports are not isolated consumer grievances but symptoms of a deeper governance failure—one rooted in monopoly contracts, weak regulation, and misplaced revenue priorities.
By P SESH KUMAR
New Delhi, October 24, 2025 — Flyers expect the stampede of security, the cramped gate lounge and perhaps a last‐minute coffee before boarding to linger as part of the modern airport ritual. What they rarely foresee is the silent captive market lurking beyond the security gate: overpriced bottled water, inflated sandwiches and un-negotiable access to everyday goods at three to five times (or more) street‐level prices.
In India, this is not accident – it is design. The structure of long‐term exclusive concession contracts at major airports, allied with the frantic imperative of airports to boost non-aeronautical revenues, has carved out monopolistic retail markets inside terminals.
Meanwhile regulatory bodies appear to remain asleep at the switch: the Airports Economic Regulatory Authority of India (AERA) is empowered only for aeronautical charges, the Competition Commission of India (CCI) has not treated concession-based retail foreclosures as competition issues, and the Ministry of Civil Aviation (MoCA) has been silent on pricing.
From the dawn of commercial aviation in India, airports were built and managed on a “build-operate‐transfer” or “public‐private partnership” logic. As aeronautical business matured, airport operators (both the Airports Authority of India (AAI) and private/PPP operators) discovered that the real goldmine lay not just in landing fees or terminal charges, but in retail, food & beverage, parking and advertising. Indeed, at India’s busiest airport, the non-aeronautical revenues (retail plus duty-free plus space rental) now surpass the aeronautical component.
In the quest to monetize every foot of terminal, airport operators began granting large blocks of retail concession rights to selected vendors under long exclusive contracts, which promised the vendor (for example) all retail of bottled water, all food & beverage of a specific class, all duty-free, etc, in a defined zone. The vendor in turn paid a “Minimum Annual Guarantee” (MAG) or rent to the operator, often irrespective of actual sales, thus transferring risk upstream while anchoring itself in a captive terminal audience.
Inside that arrangement lies the problem. The passenger, once through security, is in a captive setting: no outside competition, often no alternative vendor. The vendor knows the captive nature of demand and the high fixed payments to the airport operator mean the vendor must recoup via high margins.
Combine that with long‐term exclusivity and minimal oversight on pricing, and you have the perfect recipe for inflated prices. The retail market inside an airport ceases to resemble a normal competitive retail environment—it becomes a quasi-monopoly concession zone.
The fact that a bottle of water might cost ₹100 when a street shop charges ₹20 is not accidental, but a symptom of this structural design. A recent article summarises this as “a systemic problem caused by the way airport retail is structured.”
Now layer in the regulatory void. The MoCA, while the strategic regulator for civil aviation, focuses on licences, approvals and airport infrastructure-even bag allowances-but remains silent on what a passenger should pay for a sandwich after security. AERA regulates aeronautical tariffs (landing, parking, user-development fees) under the AERA Act, but stops short of non-aeronautical services such as retail kiosks inside terminals.
Meanwhile the CCI, tasked with preventing anti‐competitive agreements and abuse of dominance under the Competition Act, has not meaningfully engaged with concession agreements in airports: the literature observes that airports are treated as “infrastructure hubs” not as “retail markets,” thereby escaping Section 3 or Section 4 scrutiny.
In effect, the retail concessions game became an elegant triple-lock: exclusive concession contracts on one hand, lack of pricing oversight on the other, and regulatory indifference at the third pillar. The result is that the average passenger pays twice or three times what they would outside, the vendor enjoys monopoly rent, and the airport operator enjoys a steady non-aero revenue stream that masks the operational cost-recovery problem.
At the same time, policymakers and regulators sit back, pointing to commercial necessity, high terminal cost, security overheads, and risk mitigation to justify high concessions and pricing. Such rationalisation, however, masks the fact that the internal market is captive and the end-consumer passenger has zero choice.
The core lesson from global practice—particularly in the US—is revealing. Take the example of the Port Authority of New York & New Jersey which mandates a “street price plus 10 %” cap for concessionaires at its airports. Vendors submit price lists, undergo audits and are penalised for deviations. The idea: the passenger inside the airport should not pay wildly more than a commuter on the street. In India, by contrast, no such rule exists.
The logic from the airport operator is that terminal retail costs more-security, logistics, captive audience-but left unchecked, that logic becomes a licence to extract. The institute of balanced concession contract design (such as the handbook by International Air Transport Association (IATA)) emphasises aligned incentives, transparency, and regulated mark-ups.
From the passenger’s vantage, this is not merely a mild annoyance-it is a public interest issue. Airports are often the first and last point of contact for many Indians with the aviation ecosystem. Treating passengers as mere spenders rather than customers undermines consumer dignity.
It also undermines trust in the civil aviation value‐chain. From a competition law perspective, it raises the spectre of “price gouging” in a captive market-a scenario where dominant vendors or operators impose unfair terms because the consumer cannot escape. From a governance angle, it reveals an airport business model calibrated to maximise non-aero revenue at the expense of consumer interests. And from a policy lens, it shows how critical sectors-airport terminals-are regulated for infrastructure and safety but not for consumer fairness.
Why then does this persist? Because the rationalisation is compelling. Airports are high-cost, high-risk businesses: capex, security, connectivity, seasonal variation. Non-aeronautical revenue becomes the buffer that holds the financing together. If concession rents fall, the airport threatens financial stress. Vendors are under pressure (the MAGs can be very steep) so they pass cost to the passenger.
The concession model then becomes a ‘passenger pays’ model. The irony is that the more the airport claims to subsidise aeronautical charges (to airlines/passengers), the more the retail outlet drives up costs to compensate. The system rewards the very price inflation it externally condemns.
But if the model is dysfunctional, what are the ways forward? First, inject regulatory oversight of retail tariffs inside terminals. If AERA’s mandate were expanded to include non-aeronautical services or a separate regulator established, the asymmetry could be addressed.
Second, the CCI should publicly embrace airport concession markets as retail markets subject to competition law-require AAEC (appreciable adverse effect on competition) assessments, test exclusivity provisions, cap MAG-rent constructs that force vendor cost-shifting to passengers. Third, new concession contracts should build in “street pricing” models – benchmarks tied to outside retail markets, binding audited submission of price lists, robust grievance redressal for passengers. Fourth, MoCA should amend the Passenger Charter (via the Directorate General of Civil Aviation) to include rights such as maximum retail price disclosures, essential items at MRP, transparent concession reporting.
Only then will the airport retail environment shift from “take what you’re given” to “fair what you’re charged”.
In conclusion, the story of airport retail in India is not a mere consumer complaint about overpriced coffee and bottles of water. It is a systemic governance failure: the structure of concession agreements has locked passengers into captive, monopolistic markets; regulatory bodies have lacked jurisdiction or will; airports have doubled down on retail as a source of revenue without balancing consumer interest.
It is time for a paradigm shift: to recognise that airports are not just transit nodes, but public‐facing commercial spaces with rights and risks for passengers. Until the law catches up, the next time you pay ₹100 for that bottle of water after security, remember: you are not just buying hydration—you are contributing to a hidden infrastructure business model.
(This is an opinion piece, and views expressed are those of the author only)
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