The Cabinet Committee on Economic Affairs, on Friday, approved 49 per cent foreign direct investment (FDI) in the aviation sector, allowing foreign carriers to pick up stake in domestic airlines. This is likely to pave way for the much-needed equity infusion into domestic carriers, including loss- making Kingfisher Airlines, which are passing through turbulent times as majority of them are crying for funds to support their operations. “Though FDI of up to 49 per cent, 75 per cent and 100 per cent was there in the aviation sector, foreign airlines were not allowed,’’ Civil Aviation Minister Ajit Singh told reporters after the Cabinet meeting.
Current FDI norms allow foreign investors, not related to airline business, to directly or indirectly own an equity stake of up to 49 per cent in an Indian carrier. Allowing foreign airlines to pick up stakes in Indian carriers has been a long-pending demand of the aviation sector.
The Indian aviation industry and the domestic carriers are suffering losses because of high taxes on jet fuel, high airport fees, costlier loans, poor infrastructure, and cut-throat competition. Except IndiGo, all airlines have posted losses in the financial year ending March 31.
Cash-strapped Kingfisher Airlines, which is burdened with a debt of over Rs.7,000 crore, and is operating with a bare minimum fleet, has been the most vocal supporter of allowing FDI in the sector.
The opening of the sector to foreign airlines may, however, bring good news for passengers who would benefit from more competitive fares, better product and services and better international connectivity.
Foreign carriers such as British Airways and Virgin Atlantic Airways have expressed interest in investing in Indian carriers.
However, Lufthansa Airlines said it had no plans to make further investments in Indian carriers.