Domestic carriers welcome the move

The Government decision to allow foreign airlines to again invest in domestic carriers has been welcomed by the existing players and consultants associated with the sector.

In a statement, Kingfisher Airlines said it was “pleased” about the Government decision.

“This will open up a wide range of opportunities for both Indian and foreign carriers who wish to participate in the strong growth potential for civil aviation in the country. Kingfisher will now be able to re-engage with prospective airline investors in a more meaningful manner and move towards re-capitalisation and ramp up of operations,” the airline said in a statement.

The severely cash-strapped airline currently operates about 100 daily flights, down from over 400 in January this year.

Jet Airways merely said that it welcomed any policy initiated by the Government.

The Centre for Asia Pacific Aviation said this decision would bring much needed long-term financial and strategic capital and expertise.

Kapil Kaul, India head of CAPA said, “We believe that allowing foreign airline investment is an important step in establishing a more professional and corporatised sector. The move will result not only in strategic capital and expertise coming into the market, but as a result of its presence, other institutional funding may also feel more confident about investing alongside.”

“But the balance sheets of most of the incumbent carriers are relatively weak and the sector faces numerous structural challenges. So, foreign airlines will make their own assessments about whether they consider a carrier to be a suitable investment at this time,” Kaul said.

Ankur Bhatia, Member, CII’s National Committee on Aviation, felt that the move will help carriers to induct fresh equity that can be used to pay off debts. Kingfisher Airline alone has a debt of over Rs 6,000 crore.

Partner, Advaya Legal, Ramesh Vaidyanathan, said that the latest decision will help bring international best practices to the Indian aviation sector apart from improving the safety and legal compliance aspects of the sector.

However, aviation analysts feel that the results are unlikely to be immediate. Carriers from the Gulf, as well as the likes of IAG and Singapore Airlines have all been watching the sector with interest and informal discussions have taken place in several cases.