India amends FDI to allow foreign airline investment
The Indian government announced an amendment to its foreign investment rules last week, allowing foreign companies to invest in Indian supermarkets and airlines.
Foreign investors can invest for up to a 49 percent stake in Indian carriers, which have been financially troubled over the last three years. Kingfisher, SpiceJet and Go Air are three airlines looking for fresh capital, and have lobbied for the rule change which would allow them to bring in strategic partners.
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Foreign airlines can now invest in Indian carriers which operate scheduled and non-scheduled services. Despite the rule change, however, potential investors will still encounter restrictions. Subject to approval from the Indian government, two-thirds of directors at an Indian carrier must be Indian citizens.
Several international carriers, such as Singapore Airlines and Lufthansa have unsuccessfully tried to enter the Indian market in the past. A stake in an Indian carrier could change the ‘capacity crunch’ that a number of carriers face, who continually keep pushing the government for the rights to fly more, in addition to giving airlines access to dozens more cities.
Despite the move by the Indian government, it is expected that the decision to allow new investors may have come too late for Kingfisher, whose founder Vijay Mallya has for many years been an active and vocal lobbyist against the ban on foreign airline investment. The airline has curtailed operations by almost 70 percent, shouldering heavy debts.
Update: SpiceJet have reportedly begun 'very preliminary' talks with a number of gulf carriers, and could be expecting to gain investment this fiscal year.
