Foreign airlines planning to start a new carrier in India may find it difficult to do so because they will require a local permit—which may not be easily issued—before approaching the foreign investment board.
New airline licences, which will heighten competition in the domestic market, are unlikely to be handed out easily, aviation minister Ajit Singh indicated in an interview.
A foreign airline can start a new airline with a 49% stake in an Indian company that is 51% owned by local investors, the government announced in September as part of a liberalization drive. A firm such as this will require a no-objection certificate from the aviation ministry and approval from the Foreign Investment Promotion Board, according to Singh.
But the ministry will be cautious in giving new airline permits, Singh said last week. “A lot of things need to be checked,” the minister said, “If you go through the experience of the US market, a passenger and demand mismatch can create havoc.” More new firms could mean another round of a potential fare war to gain market share when most Indian airlines have been losing money for the past few years.
For the first time since 2008, growth in 2012 has slipped into negative territory in the domestic passenger market as fares have risen steeply and Kingfisher Airlines Ltd has been grounded as per a report in the Mint.
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