Even if the government allows foreign direct investment (FDI) in aviation, there’s unlikely to be a deluge.

‘’The whole thing has been blown out of proportion. Not more than three to five foreign airlines will be keen on picking up stakes in Indian carriers,’’ says a Mumbai-based investment banker, who has worked on multiple airline deals in India.

The government is planning to allow foreign carriers to own up to 49 per cent equity in Indian carriers. A decision was deferred today to next week, for more discussion. 

Foreign airlines which could be interested in taking stakes in Indian carriers are Etihad, Qatar Airways, British Airways (BA) and Singapore Airlines (SIA). This is based on their investment record and known intention to invest in the Indian market as per a report in Business Standard by Ranju Sarkar.

Experts say there may not be a rush of FDI in aviation when India opens the doors What the Indian airline market has on offer? A potentially big market Air traffic growing at 18 per cent compound annual growth rate (CAGR) - faster than Europe and the US Market to consolidate; yields have shot up this year Local airlines can draw traffic from smaller towns & feed into foreign carriers’ hubs in Europe/West Asia

Downsides -  Highly competitive market with irrational (pricing) behaviour Market still fragmented; Kingfisher’s troubles helping others High cost of operations due to higher fuel and infra costs Lack of secondary airports inhibits competition and lower fares Interested players

ETIHAD - Picks up minority stakes in well-run airlines Huge induction plan, so doesn’t want to manage airlines Increased stake in Air Berlin, a European budget carrier

BRITISH AIRWAYS - Stake in Indian carrier can help it fill up planes and protect its share on India-UK routes Could help it compete with aggressive rivals such as Emirates Strengthen hub in Heathrow for routing trans-Atlantic traffic

SINGAPORE AIRLINES  - Was keen to enter Indian market with the Tatas in mid-1990s Since then, air traffic in and from India has grown Naresh Goyal called it a model airline; could invest in Jet QATAR AIRWAYS Bought 35 per cent stake in cargo airline, Cargolux Prefers minority stakes in well-managed airlines Dark horses

EMIRATES -  Dubai is the largest international hub in the region Operates 187 flights a week to ten cities in India A local airline can feed into these flights AIR ASIA Was keen to fly to Europe, America via India to fill planes from here Have stopped flights to India because of lack of business

LUFTHANSA -  Keen on India, partnered ModiLuft in early 1990s Growing market can offset slow growth in Europe Traffic from India can be routed though its hub in Munich

Etihad has taken 29 per cent stake in Europe’s third-largest budget carrier, Air Berlin. Qatar Airways has bought 35 per cent in a Luxembourg-based cargo airline, Cargolux International. Both Qatar and Etihad like to take minority stake in airlines where a good management is in place. They both have huge capacity induction plans and don’t want to spare management resources to run another airline.

Among European carriers, BA would be the most keen to buy into an Indian carrier, given its interest in India and the growth in West-bound traffic from here. With Kingfisher Airlines’ entry into the Oneworld Alliance uncertain, BA would like to protect its turf by entering into a strategic alliance with another Indian carrier.

Lufthansa had helped ModiLuft take wings in the early 1990s but investment banking sources say the airline has zero interest in India, given the competition, irrational behaviour in the Indian market and its bitter experience with ModiLuft. American carriers are also not interested.

Cash-rich SIA, which at one point was keen on entering the Indian market with the Tatas, could be interested in Jet Airways. ‘’Naresh Goyal looked up to SIA as a model airline and a lot of SIA hands used to work for Jet,’’ says Steve Forte, former CEO of Jet and a US-based consultant. He says even BA would be keen on Jet, as the two could explore lots of synergies and save costs. For instance, Jet could offer ground-handling and engineering support to BA flights in India and BA could offer the same in Europe. Or, the two could source spares for their common fleet. ‘’A lot of this can also be achieved through commercial agreements, code share flights. Interest levels would also depend on the extent to which India’s frees investment norms or tries to squeeze airlines by putting lot of conditions,’’ says Forte.

Emirates is another major airline that could be interested in taking stake in an Indian carrier but experts don’t think it would. ‘’Emirates will never come here, though it generates huge business from India (operates 187 flights a week, to 10 Indian cities). It bought Air Lanka and had a horrible experience. It sold it back to the Sri Lankan government,’’ says the banker quoted earlier.

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