New Delhi, Sept. 13: Domestic private carriers have either started talks with overseas airlines or will be doing so on hopes that foreign direct investment (FDI) will be allowed in aviation.
The cabinet committee on economic affairs (CCEA) may take up the proposal tomorrow to allow foreign airlines to buy up to a 49 per cent stake in cash-starved Indian carriers. Commerce minister Anand Sharma said the matter was on the agenda.
According to sources in private airlines, Gulf-based airlines have shown interest in them. SpiceJet said it had held “preliminary discussions” with a Gulf airline.
“There have been preliminary discussions to check in-principle whether there is interest on both sides and the confirmation there would be ‘yes there is’,” SpiceJet CEO Neil Mills said.
Any such tie-up depends on a policy tweak in aviation, which currently prohibits FDI. Mills said as the framework for FDI was not yet in place, overseas carriers were reluctant to start formal negotiations.
“Talks have been on a preliminary basis because they’ve quite rightly said what’s the point in investing money in due diligence if the rule to enable an investment does not even exist,” Mills added.
He declined to reveal whether UAE-based Etihad Airways and Qatar Airways were among the interested parties. There have also been reports that Emirates Airlines is interested. However, none of the airlines has come out in the open with their intentions to invest.
Kingfisher Airlines chairman Vijay Mallya had earlier said the carrier was awaiting a green signal to FDI in aviation to bail out the company. He claimed that two non-aviation players and a foreign airline were keen to invest in his airline.
“A partnership with an international carrier will give SpiceJet access to economies of scale on procurement contracts and long-haul options for its passengers,” said Mills.
Mills further said majority of the carriers realised that they would not benefit much from a relaxation in the FDI limit.
“Either their debt burden is so large that nobody would want to take a stake in them because you inherit a stake in the debt,” he said.