Foreign airlines’ investment offers lifeline to industry

INDIA’S beleaguered airline industry was thrown a potential lifeline on Tuesday (January 17) when the Aviation Ministry said it would recommend that the government allow foreign airlines to buy stakes of up to 49 per cent in Indian carriers.India currently bars foreign airlines from buying into Indian airlines, although foreign investors are allowed to hold a cumulative 49 per cent.“The question was to allow other airlines to participate in FDI (foreign direct investment). I discussed it with the finance minister and he agreed,” Civil Aviation Minister Ajit Singh told reporters. “We realised that FDI is one of the factors that will help the industry survive the current financial problems.”Shares of Indian airline companies surged by 7 to 12 per cent ahead of a meeting earlier in the day between Singh and Finance Minister Pranab Mukherjee.India’s loss-making airlines are grappling with high jet fuel prices, low fares and an economic slowdown.The total debt of the industry is expected to rise to $20bn (£13.30bn) for the fiscal year ending in March, according to an Aviation Ministry report.A decision to open up the sector would be especially welcome to debt-laden Kingfisher Airlines, which has long lobbied for the change.“It is strongly welcomed. It has been long overdue,” said Kapil Kaul, regional head of the Centre for Asia Pacific Aviation, an aviation consulting firm.“This will lead to capital, strategic expertise. This will also lead to foreign and domestic fund flows to the sector.” Kaul told reporters.US billionaire Wilbur Ross briefly invested in budget airline SpiceJet in 2010, making it the only Indian carrier to get major foreign investment in recent years.British Airways has been speculated as a possible candidate to pick up a stake in Kingfisher, which said last month that it would join the global oneworld alliance from February to help boost its competitiveness and finances.“The current losses of the airlines make the valuations attractive,” said Amber Dubey, director of aviation at KPMG.An analyst at a Mumbai brokerage, who did not wish to be identified, said airlines such as Kingfisher and Jet Airways, with large founder stakes, would be comfortable with diluting their shares to allow investment by foreign carriers.