November 16, 2012
The Indian government, which to date has received more questions than serious responses to its foreign direct investment (FDI) proposal, is considering consulting airline operators about amending the two-month-old policy.
While private airlines, such as Jet Airways, Kingfisher Airlines and SpiceJet, were elated at the government’s decision to open FDI, no foreign airline has shown any genuine interest or approached the government with a proposal, a civil ministry official said.
Several cash-rich Middle East carriers, such as like Emirates Airline and Etihad Airways, showed some interest, but foreign low-cost carriers say more needs to be done if they are to fully tap the huge Indian market.
“We are also surprised why there is no activity. We will ask these local airlines why FDI failed to pick up. What are the issues they are facing, if they are talking to someone,” says the official.
The federal cabinet on Sept. 14 approved a long-pending policy reform allowing foreign airlines to buy stakes of up to 49% in the country’s local carriers.
It was expected that once FDI rules were relaxed, much-needed cash would flow to India’s struggling private airlines. The total FDI inflow in the aviation industry currently stands at 24.05 billion rupees ( $433.75 million), or 0.25% of the total FDI inflow.
The high cost of doing aviation business in India is squeezing the lifeblood out of the airline sector, which is rated as the ninth-largest civil aviation market in the world.
Almost all airline operators in the country are facing high debt burden and liquidity constraints, in addition to inadequate infrastructure, poor management and rising fuel prices.