India to Consider FDI in Domestic Carriers

July 8, 2010 Posted by India Briefing Reading Time: < 1 minute

Jul. 8 – Authorities will soon begin talks on possibly raising foreign direct investment in local carriers to push New Delhi’s recently opened Terminal 3 into becoming an international aviation hub.

“This issue would be discussed in coming few days. A final view may be taken shortly,” Civil Aviation Minister Praful Patel said in a statement. Foreign investors are technically allowed to invest as much as 49 percent in local carriers but the government has been hesitant to allow this over security concerns.

“Things are changing for better now and the outlook looks good for the industry,” Patel added. Local Indian carriers were more prone to hostile takeovers in 2008 and 2009 when the industry was unstable.

India has ambitions to make the new terminal a global hub like Singapore, Dubai and London but will need foreign expertise and funding to achieve this. Currently, India’s airports serve as a feeder destination to fill in seats for Gulf and Southeast Asian airlines.

The terminal’s management group is led by the infrastructure company GMR Group. A senior GMR official says that global hubs will need an efficient airport, a well-connected airline and supportive government policies. ‘‘Out of these three things, Delhi now has the airport required,” said the official.

The government must be willing to implement policies that will make operations in the new terminal more profitable for carriers. ‘‘The five-year stipulation on Indian carriers from flying abroad should be relooked at as even one-day old foreign carriers with a fleet of one or two planes fly into India as their first destination,’’ said the official.