The Cabinet is set to examine a proposal to allow foreign airlines to pick up equity in Indian carriers, as per a DNA report by Sindhu Bhattacharya. An official source said the Ministry of Civil Aviation has mooted a 24 per cent cap on investments by foreign airlines, whereas the Department of Industrial Policy and Promotion is pushing for 26 per cent.
“The Ministry of Civil Aviation has proposed 24 per cent investment by foreign airlines. The Cabinet is likely to take a call on the issue in a couple of weeks,” the source said. “Whatever decision the government takes, everyone will have to accept.” A 26 per cent cap would allow a foreign investor to have voting rights on the board of the Indian airline. As of now, airlines are allowed to take in 49 per cent foreign direct investment (FDI), but any investment by foreign carriers is banned. The proposal, if cleared, could help Kingfisher Airlines raise much needed cash. Indeed, it is the possibility of Kingfisher actually failing that has pushed the FDI issue to the fore. Barring IndiGo, all domestic airlines have been incurring losses due to high jet fuel prices, a depreciating rupee and fierce competition. Some, like Kingfisher, which reported grim quarterly results and an erosion of networth in the quarter ended September, have been asking the government to change the rules to allow investment by foreign carriers. Neil Mills, CEO, SpiceJet said he has written to the government in favour of the proposal. Others, including Jet Airways, which was opposed to any such move till recently, are coming around. During a conference call with analysts last week, Sudheer Raghavan, Chief Commercial Officer, Jet Airways said his airline is now “neutral” to any such move.
Click here to see the original article>“The Ministry of Civil Aviation has proposed 24 per cent investment by foreign airlines. The Cabinet is likely to take a call on the issue in a couple of weeks,” the source said. “Whatever decision the government takes, everyone will have to accept.” A 26 per cent cap would allow a foreign investor to have voting rights on the board of the Indian airline. As of now, airlines are allowed to take in 49 per cent foreign direct investment (FDI), but any investment by foreign carriers is banned. The proposal, if cleared, could help Kingfisher Airlines raise much needed cash. Indeed, it is the possibility of Kingfisher actually failing that has pushed the FDI issue to the fore. Barring IndiGo, all domestic airlines have been incurring losses due to high jet fuel prices, a depreciating rupee and fierce competition. Some, like Kingfisher, which reported grim quarterly results and an erosion of networth in the quarter ended September, have been asking the government to change the rules to allow investment by foreign carriers. Neil Mills, CEO, SpiceJet said he has written to the government in favour of the proposal. Others, including Jet Airways, which was opposed to any such move till recently, are coming around. During a conference call with analysts last week, Sudheer Raghavan, Chief Commercial Officer, Jet Airways said his airline is now “neutral” to any such move.