The government's reported plans to allow foreign airlines to invest in local airlines are wholly welcome. The cash-strapped domestic aviation industry should have access to risk capital that has knowledge of the vagaries of the airline business as per an ET report.
The policy on foreign investment in aviation is restrictive now. No foreign airline can pick up equity — directly or indirectly — in a domestic carrier, except in cargo airlines. Financial investors such as private equity funds and non-airline companies that have no connection with a foreign carrier are allowed to invest in a local airline.
Making expertise in a business a disqualification makes for little sense. Private domestic carriers needs capital, more important, informed capital that understands the dynamics of the airline business.
Fears in the past of a foreign takeover of the Indian skies look entirely misplaced now. Also, differences among private domestic carriers over allowing foreign airlines have narrowed down after the financial crisis that hurt their profitability, already hit by surging fuel costs and fierce competition. Opening up the sector would help capital inflows and technology collaborations.
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