India seeking investment in ailing airlines

India’s aviation and finance ministers yesterday urged that foreign airlines be allowed to buy stakes of up to 49 per cent in local carriers to provide vital cash injections for the struggling industry.

Permitting foreign investment could bring much-needed capital for India’s cash-strapped Kingfisher, Jet and other airlines which have been battling to stay aloft in the fiercely competitive aviation market.

“The question was to allow foreign airlines to participate in foreign direct investment,” Civil Aviation Minister Ajit Singh told reporters following a late-night meeting in New Delhi. “I discussed it with the finance minister (Pranab Mukherjee) and he has agreed. We will bring out a note for the cabinet (to approve) now.”

Foreign airlines are currently banned from owning stakes in Indian carriers although non-airline investors from abroad can hold as much as 49 per cent.

Indian carriers have been seeking a cash lifeline by demanding a change in policy.

India’s airlines may lose a total of $2.5 billion in the year ending in March 2012, according to the Centre for Asia Pacific Aviation, an industry body.

On the surface, India’s population of 1.2 billion should make the airline industry a success story, and the passenger sector is estimated to be growing at between 15 and 20 per cent each year.

But all of India’s six main airlines – barring budget carrier IndiGo – announced steep losses in the financial quarter to September as they contend with price wars, high fuel costs and an economic downturn.