India Yet to Decide on Overseas Stake in Airlines

India is still examining a plan to allow overseas airlines to buy stakes in local carriers, Civil Aviation Minister Praful Patel said in Mumbai today.

Such a move will reverse a more than decade-old rule banning non-Indian airlines from owning shares of domestic carriers, paving the way for Singapore Airlines Ltd., Virgin Atlantic Airways Ltd. and others to invest.

The move may give foreign carriers a chance to invest in a market that Airbus SAS expects to surge ninefold in the two decades to 2026. The plan will also give carriers like Jet Airways (India) Ltd. and SpiceJet Ltd. access to cash and expertise amid a record $2 billion industrywide loss last year.

India currently permits overseas companies to own as much as 49 percent of an Indian carrier. No direct or indirect ownership by an airline is allowed.

Patel said he was hopeful the current government would be able to take a decision on the investment proposal. The five-year term of Prime Minister Manmohan Singh’s government comes to an end in May, by which time elections are due.

India will crack down on any attempt at cartelization, the minister reiterated. The Directorate General of Civil Aviation, the regulator, is inquiring into cartelization allegations after some airlines made coordinated fare increases earlier this month.

Patel, who said the economic slowdown was taking a toll on air traffic, ruled out the establishment of a stabilization fund sought by Indian carriers. They had asked the government to set up a stabilization fund of $2 billion for the disbursal of three- to-five-year, interest-free loans.

The government will decide soon on capital infusion for Air India, Patel said.

Source:www.bloomberg.com

~ by anand213 on March 1, 2009.