The Telegraph
Wednesday , December 26 , 2012
Since 1st March, 1999
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High-cost hurdle to airline stake sale

New Delhi, Dec. 25: Foreign airlines will not pick up stakes in Indian carriers till steps are taken to curb high operational costs, international aviation body IATA has said.

According to Tony Tyler, chief of the International Air Transport Association (IATA) , merely allowing foreign direct investment in aviation will not be a “game changer” for the beleaguered sector.

“No, I don’t think allowing foreign airlines to invest in Indian carriers is a game changer but it is a good thing. But it will not solve the problems of Indian aviation. It certainly is a step in the right direction but it is not the panacea that some believe it is,” Tyler said.

He added that high taxes, airport costs and congestion were leading to high operating costs and acting as a deterrent to foreign carriers.

The cabinet committee on economic affairs had in September allowed foreign airlines to buy stakes in Indian carriers.

However, the move has not led to any FDI infusion though a few foreign airlines, including Emirates, have been engaged in negotiations.

Kingfisher Airlines promoter Vijay Mallya, who was expected to bring in a foreign partner for his loss-making carrier, has not been able to pull it off.

Most Indian carriers are suffering losses because of high jet fuel price, rising airport fees and costly loans even as fares remain static owing to competition. Except IndiGo, all the carriers have suffered losses in the financial year ended March 31.

Tyler said, “Any move that we see in liberalising, is a good thing. But unless conditions in India are improved for the airlines, you are not going to see a flood of foreign carriers coming into the industry because foreign capital needs a return just as anywhere else.”

The IATA chief also made it clear that merely investing fresh capital would not solve the problems. “It has to be used in a way to improve the business. If the business is loss-making then some of it needs to be used to restructure.”