Tuesday, May 02, 2017

Qatar Airways’ domestic plan: India home to foreign carriers, says Government; local players resent Foreign May 2017

Qatar Airways’ plans to set up a domestic airline in India and the government’s willingness to permit a local carrier that is fully-owned by foreigners will be a new experiment among the major aviation markets — one that could present its own set of challenges to local players and the security agencies. Top civil aviation ministry officials have welcomed Qatar Airways’ plan to tie up with Qatar Investment Authority (QIA) to set up an airline in India to serve local market — less than a year after Prime Minister Narendra Modi liberalised the foreign direct investment policy for the aviation sector, permitting foreign investment up to 100 per cent in Indian carriers, comprising maximum 49 per cent stake for a foreign airline and another 51 per cent by a foreign investor.

This also marked a key shift in India’s foreign direct investment (FDI) policy pertaining to airlines, which, like other countries, had remained guarded against allowing foreign airlines controlling local carriers for decades. Since 2012, the FDI policy in the aviation sector has been liberalised — which enabled Abu Dhabi-based Etihad Airways to buy a minority stake in Jet Airways (India) Ltd. It also allowed Tata Sons to start two separate airlines in joint venture with foreign carriers — a full-service airline with Singapore Airlines named Vistara and a low-cost airline with Malaysia’s AirAsia, called AirAsia India.

Leading Indian airlines have vehemently opposed the government’s policy permitting a local airline to be fully owned by foreigners, arguing that no other country allows a similar dispensation. World’s largest aviation market, the US, for instance, restricts foreign ownership in domestic carriers to 25 per cent. Elsewhere, in the European Union and South Korea, for example, the cap is set at 49 per cent.

While domestic carriers oppose such a move from a commercial standpoint, other countries do not allow airlines to be fully owned by foreigners as they see it as a security threat. “Apart from presenting national security issues, the easiest way to launder money is to start an airline. So there needs to be checks and balances in giving approval to a foreign-owned domestic airline,” said an airline industry executive.

The Federation of Indian Airlines, comprising Jet Airways, SpiceJet, IndiGo and Go Air, has even pressed for changes in the FDI policy. They argue that permitting 100 per cent foreign ownership in domestic market does not bring in much capital investments due to the nature of the sector where most planes are leased and departure and landing slots are the assets.
02/05/17 Sunny Verma/Indian Express