The Telegraph
Friday , September 21 , 2012
Since 1st March, 1999
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Foreign airlines sniff scope

New Delhi, Sept. 20: The government today notified the cabinet’s decision to allow foreign airlines to pick up to a 49 per cent stake in private Indian carriers, paving the way for much-needed equity infusion into domestic airlines.

“The Government of India has reviewed the position in this regard and decided to permit foreign airlines also to invest in capital of Indian companies operating scheduled and non-scheduled air transport services up to the limit of 49 per cent of their paid-up capital,” the notification said.

By allowing FDI in aviation, the government has opened up new avenues of fund raising for domestic carriers who are finding it tough to borrow from Indian banks.

The market is already abuzz with speculations surrounding stake purchases by Qatar Airways, SilkAir, Etihad and Singapore Airlines.

According to sources, Singapore-based SilkAir is in talks with GoAir, which is looking to expand its international operations. GoAir officials, however, declined to comment but said some foreign airlines had shown interest.

SpiceJet, according to sources, has held talks with Gulf-based Qatar Airways. Though SpiceJet confirmed it had held “preliminary discussions” with a Gulf airline, it refused to divulge the name of the investor.

“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 had said.

According to a recent Capa report, carriers from the Gulf as well as the International Airlines Group, Lufthansa and Singapore Airlines are keen, and informal discussions have taken place in several cases.

“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,” the report states.

According to Capa, GoAir and SpiceJet have good prospects of attracting foreign investment.