Government considers allowing foreign airlines to buy stakes in local carriers

New Delhi: The Indian government is considering allowing foreign airlines to buy up to a 25% stake in local carriers, civil aviation minister Praful Patel said on Tuesday, as the aviation industry struggles to cope with slowing traffic and declining economic growth.
Patel had maintained until late last year that foreign airlines could not be allowed to invest in Indian carriers because most of the local carriers were not mature enough. The suggestion found no place in a civil aviation policy that is still awaiting Union cabinet approval.
On Tuesday, however, the minister said the possibility of overseas airlines being permitted to buy a stake of between 20% and 25% in domestic carriers cannot be ruled out now.
India’s airlines have been struggling with intense competition, high costs and declining passenger traffic as economic growth slows. Airlines such as Kingfisher Airlines Ltd, the country’s second biggest by passengers flown, have said they favour foreign investment. International carriers Virgin Atlantic Airways Ltd and British Airways Plc. said as late as November that they were keen to acquire stakes in Indian carriers.
Analysts doubt whether such a proposal—which has been controversial in the past— could be implemented in the time left before the general election, which is due to take place by May.
“I doubt they will be able to do so in three-four months, but they can start the ball rolling,” said Robey Lal, former board member of the Airports Authority of India and former India head of the International Air Transport Association (Iata).
Foreign investors could help introduce better management practices to the country’s airlines, but there should be safeguards.
Most countries, including the US and the UK, do not allow foreign airlines to invest in their carriers because of “anti-trust issues, monopolistic tendencies in the market and security issues,” said Mark Martin, who works at consultant KPMG’s India office.
14/01/09 Tarun Shukla/Livemint

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Categories: Foreign Jan 2009, Indian Aviation- In General Jan 2009, New Jan 2009