Discriminate against foreign airlines in FDI policy?

UB group chief Vijay Mallya’s bid to open the Indian skies for investment by foreign carriers has brought back to limelight the contentious aspects of foreign direct investment (FDI) in civil aviation.
Several foreign airlines, including Singapore Airlines, made attempts to pick up stake in Indian carriers, but none succeeded in piercing the policy barrier. Recently, there were reports about British Airways trying to buy equity in an Indian airline and that attempt too has met with a similar fate.
Under such circumstances, will the policymakers turn more liberal now? If top government functionaries are to be believed, the opening up is unlikely to happen now. That is quite unfortunate for Indian airlines as they are struggling with mounting losses, liquidity crunch and overcapacity.
It is not that foreign airlines are queuing up to pump in moolah into Indian carriers, but there is no doubt that closure of one window of opportunity brings valuations under pressure. Given the state of their finances, this is something that Indian airlines would love to do without.
Once the doors are opened, strong players with persisting interest in India such as Emirates, Singapore Airlines, Lufthansa and British Airways would love to invest in Indian carriers due to the huge huband-spoke benefits that would be available. As of now, most foreign carriers primarily touch gateways like Mumbai and Delhi. Therefore, strategic alliance with a domestic player would enable them to route traffic from the hinterland to boost their market share and revenue.
Before criticising the policy, we should remember that this is not responsible for the sorry state of affairs that Indian airlines find themselves in. While government-owned Air India is a different kettle of fish, others such as Jet Airways and Kingfisher have to blame themselves.
20/11/08 Economic Times

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Categories: Foreign Nov 2008, Indian Aviation- In General Nov 2008