Beg, borrow, fly

The Government is feeling generous with our money: it is thinking of throwing away close to Rs 23,000 crore at Air India, mercifully over the next ten years. But, more sensibly, it is also examining a proposal to allow foreign airlines to acquire a stake in cash-strapped domestic carriers, most of which are losing money.
For those who are not aware, India has this extraordinary policy of allowing FDI in India's domestic airlines but everyone and his dog can invest, except foreign airlines. It is a bit like saying anyone can play for India's cricket team except cricketers.
There was a time when foreign airlines were allowed to invest in airlines in India. So Kuwait Airways and Gulf Air had a stake in Jet Airways. But because of some strong lobbying, the policy was changed. The stake held by the foreign airlines was then bought by Jet.
Today, those who lobbied against foreign airlines holding equity in Indian carriers want the law to be reversed.
India's three full service airlines — Air India, Jet Airways and Kingfisher — are all reeling under losses. Kingfisher's losses increased by over 40 per cent to touch Rs 263.54 crore during the first quarter of this fiscal, compared with losses of Rs 187.35 crore recorded during the corresponding quarter of last fiscal. Similarly, Jet Airways has also been in the red.
Getting a foreign airline in as a partner, albeit a junior one, could also provide benefits other than cash. The international airline could help its Indian partner cut costs and bring about greater efficiency in its operations. It could also provide the domestic airline access to its international partner's global network, bringing in more passengers, all of which would translate into a healthier balance sheet.
30/10/11 Ashwini Phadnis/Business Line

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Categories: Indian Aviation- In General Oct 2011