Foreign carriers allowed to invest in Indian airlines
New Delhi: Government on Friday finally allowed investment by foreign airlines into Indian carriers that are drowning under a collective debt of Rs 90,000 crore and accumulated losses of Rs 42,700 crore. Airlines like Kingfisher had linked their survival to this policy change of letting foreign carriers pick up to 49% stake in domestic ones.
 The government tried to allay fears that had delayed this move for so long — mainly related to security and foreign players virtually taking over small Indian airlines. There will be no automatic clearance for such proposals and they will be vetted by FIPB and security agencies.
The JV airline will have to be registered in India and also have its principal place of business here. The chairman and at least two-thirds of directors will have to be Indian citizens. “All foreign nationals likely to be associated with such JVs need to be cleared from security view point before deployment,” an official said.
The 49% foreign ownership cap means that SpiceJet, GoAir and possibly Kingfisher may be the first beneficiaries along with start-ups. Kingfisher chief Vijay Mallya tweeted: “Bold decisions taken by government. Fantastic to restore confidence and kick start economic growth opportunities.” A ‘pleased’ airline said in a statement: “Kingfisher will now be able to re-engage with prospective airline investors in a more meaningful manner and move towards re-capitalization and ramp up of operations.”
SpiceJet is also learnt to have had been in advanced stage of investment talks with a Gulf player but that lead went cold due to UPS’s very long k a b h i h a a n , k a b h i
n a aon the issue. Foreign carriers, however, caution that India needs to rationalize its cost structure for airlines before they come with their money and expertise.
“India must reduce the price of jet fuel and rationalize airport charges. Having the most expensive jet fuel for domestic flights globally and allowing Delhi airport to hike charges by almost 350% is not exactly laying out a red carpet. India’s traffic generating potential is unmatched so some improvement in cost structure would do the trick,” said a senior official of a foreign airline.
But, some Indian analysts are already thinking big. KPMG partner Amber Dubey said: “It would also pave the way for Indian carriers to buy stake in global carriers some day. Sounds unimaginable today. Just like no one imagined that iconic brands like Arcelor, Novelis, Tetley, Blackburn Rovers or Jaguar-Land Rover could be owned by Indians someday.”
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