Foreigh Airlines will soon be able to hold upto 49% stake in Indian Airlines

Ministers reach consensus, to seek cabinet nod soon

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A key group of ministers on Tuesday reached a consensus on allowing foreign airlines to buy up to 49 per cent stake in Indian carriers. Foreign carriers are not currently allowed to directly or indirectly make any investment in Indian carriers.

“We have reached a consensus on allowing foreign carriers to buy 49 per cent stake in Indian airlines and a Cabinet note will be moved soon,” said Union Civil Aviation Minister Ajit Singh after a meeting with Finance Minister Pranab Mukherjee, also attended by secretaries of the civil aviation, commerce and petroleum ministries. 

The Indian aviation market is attractive. The domestic airline industry, despite a feared slowdown, has been doing reasonably well, with passenger growth at 18 per cent in the last calendar year. It is expected to grow at a comfortable clip of above 15 per cent this year. The market has seen fares go up by around 15 per cent, especially as most airlines have pared capacity as per a BS report.

Analysts say the move could bring in a fundamental shift in the country’s aviation sweepstakes. Kapil Kaul, CEO of the Centre for Asia Pacific Aviation, Indian sub-continent, says, “While the global scenario in 2012 is not good, you will see some players come in the near term and through 49 per cent they will have a major say in the operations and strategies of Indian carriers. It will also pave the way for large corporates like Tata-Singapore Airlines, who have stayed away because of policy flip-flops, provided the government provides new licences.”

Kaul says companies like the International Airlines Group set up by British Airways to invest in other carriers and many cash-rich West Asian airlines looking at building a global footprint will surely enter the country.

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