Monday, October 24, 2016

The Sheikhs want to fly India's regional routes

Major airlines from the Gulf countries have shown interest to invest in India’s regional aviation market. This coincides with the government announcing a new policy to kickstart regional airlines in the country through sops and subsidies.

Minister of State for Civil Aviation Jayant Sinha told Business Standard that many foreign airlines, including major carriers from West Asia, have held negotiations with the government to fly on regional routes connecting the country’s major cities to tier-II and tier-III cities.

“We have had large airlines like IndiGo, SpiceJet, Jet Airways expressing interest. Then we have people in the UK and the US engaged in regional aviation showing interest… some large global airlines from the Gulf have expressed interest to run regional airlines in India,” Jayant Sinha said in an interview to Business Standard. He, however, declined to name the airlines.

The investment could be in the form of a stake in an existing airline or opening a new regional airline in the country. “With the recent changes in FDI (foreign direct investment) rules, India now has liberal and open policy in the world. Naturally, they will be interested,” the minister said.

In June, the government increased the FDI limit in domestic airlines to 100 per cent. But FDI is on automatic route only up to 49 per cent. The rules, however, state that the principal place of business must be in India. According to industry sources, India being a significant market for the Gulf majors, they would want to have a feeder airline, which brings West Asia-bound traffic from tier-II and tier-III cities to the metro airports. “A significant traffic to the Gulf comes from the smaller cities. Take, for instance, passengers from Chandigarh, who, until recently, had to fly to Delhi to take flights abroad. Similarly, there are cities like Indore, Vizag and Surat, which feed to the Gulf traffic. Having a joint venture with a regional carrier like Air Costa or TrueJet can be captured as a thoroughfare product,” explained an executive of a major domestic carrier.
24/10/16 Arindam Majumder & Aneesh Phandis/Business Standard