Thursday, January 11, 2018

From Air India to partially foreign-owned airline?

New Delhi/Mumbai: Foreign airlines welcomed the government's decision to allow them own a piece of Air India, but said their interest in the national carrier would depend on the details of the policy.
The Cabinet on Wednesday removed a restriction on foreign investment in Air India, a decision that government officials and aviation industry executives said would give a boost to the efforts to sell the debt-laden and lossmaking airline.

Keeping foreign carriers away wouldn't have generated the desired interest in Air India, said a senior aviation ministry official, who spoke on the condition of anonymity. "We are certain that the interest in Air India will increase (now) and we will get much more competitive bids for Air India."

India's foreign direct investment rules already allowed foreign airlines to own as much as 49% of local carriers, but there was a provision to keep Air India out of such investment. While the government now removed that restriction, it limited the total foreign investment in Air India at 49%, which will keep its control with Indians. While the FDI can be 100% in private airlines with a 49% cap on the ownership by foreign carriers, in Air India, the 49% investment can be from an airline or other investors.

A senior executive at a foreign carrier said a large number of overseas airlines would now be interested in Air India. "There are two primary reasons for it — one is that the government is likely to take away a major part of the debt from Air India, making it lucrative financially; and second is the access to the Indian market that an airline gets by acquiring Air India," this executive said, speaking on the condition of anonymity. "India is a huge market and no airline would want to miss an opportunity to get access to the Indian market."
10/01/18 Mihir Mishra, Anirban Chowdhury/Economic Times