The decision was part of several new measures announced by prime minister Manmohan Singh’s administration, which has been under fire in recent months for wavering over policy change.
Indian carriers have been going through financially troubled times over the past three years. Looking for fresh capital, three airlines—Kingfisher (IT), SpiceJet (SG) and Go Air—have lobbied for the rule change, which would allow them to bring in strategic partners. Foreign airlines can now invest in Indian carriers operating scheduled and non-scheduled services. However, the Indian government must grant investment approval and there are restrictions, including a rule that at least two-third of directors at an Indian carrier must be Indian citizens.
It is still not clear which airlines would be interested in investing in India. Several international carriers—including Singapore Airlines and Lufthansa—have unsuccessfully tried to enter the Indian market in the past. Local analysts say Gulf carriers could be the first ones to move in, as India has been a longtime source market for them to carry passengers to Europe and the US. Most carriers face a capacity crunch and must keep pushing the government for rights to fly more. A stake in an Indian carrier may change this, as well as allow them access to dozens of more cities.
The decision to allow foreign airlines as investors may have come too late for IT chairman and liquor baron Vijay Mallya. His airline has curtailed operations by almost 70% and has heavy debts.
Tweeting his approval of the move, Mallya said, “Bold decisions taken by government. Fantastic to restore confidence and kick start economic growth opportunities.”
SG CEO Neil Mills has said the airline was negotiating with Arab carriers for a stake sale. The stock price of both airlines was up at the Bombay Stock Exchange Friday.
(Cuckoo Paul - ATWOnline News)
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