Thursday, January 11, 2018

AI to be Indian-run

New Delhi: Foreign airlines will be allowed to invest up to 49 per cent in Air India, the loss-laden national carrier that the Modi government wants to sell later this year.

While unveiling a set of reforms aimed at cranking up foreign investments in the country, the Union cabinet on Thursday laid down proviso for the Air India sale: substantial ownership and effective control of the state-owned airline would continue to be vested in an Indian national.

The decision lays down the ground rules for an anticipated bidding war between a Tata-Singapore Airlines consortium and Naresh Goyal's Jet Airways in which Etihad Airways of the UAE holds a 24 per cent stake.

"These measures are intended to liberalise and simplify the FDI policy so as to provide ease of doing business in the country. In turn, it will lead to larger FDI inflows contributing to growth of investment, income and employment," a media release issued after the cabinet meeting said.

The 49 per cent foreign investment cap rules out the possibility of a foreign airline like Qatar Airways buying up Air India, which is slated to be sold either as a single entity or in parts after a group of ministers takes the final call.

"Unlike many other countries, we do need a national carrier as we need to use its fleet to serve border areas, transferring large numbers of troops in times of emergency. That is why I feel a decision to retain 51 per cent Indian shareholding is important. Personally, I feel the Kelkar Committee recommendation that the government should continue to hold a golden share conferring veto rights on decisions would be the best option for us," said P.C Sen, a former chairman of Air India.

The decision does leave room for Vistara, the joint venture between the Tatas and Singapore Airlines, to bid for Air India. By that same token, it would also allow low-cost carrier Air Asia India, the joint venture between the Tatas and Malaysian budget airline Air Asia, to join the fray.

Indigo was the first to say that it was ready to buy up Air India's international operations. At a conference call in July last year, Indigo co-founder Rahul Bhatia had said: "IndiGo is not looking at acquiring all of Air India's businesses and subsidiaries.... that would be a herculean task...we are interested in the airline operations of Air India. And more specifically, we are focused narrowly on Air India's international operations and Air India Express."
11/01/18 Jayanta Roy Chowdhury/Telegraph