Mumbai: Shares of airlines rose on Wednesday, a day before the federal cabinet is expected to consider a proposal to allow foreign carriers to buy stakes of as much as 49% in a potential lifeline to the struggling Indian aviation industry.
Cash-strapped Kingfisher Airlines, controlled by liquor baron Vijay Mallya, has been at the forefront of lobbying the government to allow foreign direct investment (FDI) by overseas carriers in India’s airlines. Other carriers that are favouring FDI include SpiceJet and Go Airlines (India) Pvt. Ltd. Jet Airways and InterGlobe Aviation Pvt Ltd, which runs IndiGo, oppose the proposal.
Foreign airlines are currently barred from investing in Indian carriers although other foreign companies can take as much as a 49% stake in them. The relaxation could help airlines that are weighed down by debt and accumulated losses gain access to capital.
Civil aviation minister Ajit Singh took the lead in proposing to allow foreign airlines to pick up as much as 49% of Indian carriers instead of the 26% his ministry had been suggesting.
In mid-December 2011, consulting firm Centre for Asia Pacific Aviation estimated that India’s airlines lose $25-30 every time a domestic passenger boards an aircraft. Domestic carriers are expected to post a combined loss of $2.5 billion in the year ended March 2012.
