India to Permit Foreign Airlines to Invest in its Carriers

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May 26 – India’s civil aviation ministry is revisiting proposals to permit foreign airlines to invest directly in its own carriers.

Currently, foreign investment of up to 49 percent is permitted in the sector, however this is only open to non-aviation companies. With India’s three major carriers – Air India, Jet Airways and Kingfisher – expected to post cumulative losses of about US$1.6billion this year, the proposal to relax FDI restrictions and open the market directly to foreign airlines is seen as one way to get in much needed investment and improvements to the carriers bottom lines.

Last year, Indian budget airline Spice Jet had to be rescued by Wilbur Ross, the U.S.-based distressed asset investor. Such moves would also defer some of the Indian government’s own burden in the industry – state owned carrier Air India is seeking an US$800million soft loan from the government.

It is believed that getting foreign airlines involved directly will also instill more confidence by foreign investors in domestic carriers, with overseas hedge funds and private equity groups more likely to join in supporting strategic investments into Indian airlines.