FDI in airlines allowed, foreign airlines welcome move

September 14th, 2012 - 8:06 pm ICT by IANS  

Pranab Mukherjee New Delhi, Sep 14 (IANS) The government Friday allowed foreign airlines to invest up to 49 percent in domestic carriers, giving wings to cash-strapped Indian carriers.

The cabinet committee on economic affairs (CCEA), chaired by the prime minister, approved the proposal that was stuck for months as there was no political consensus on the issue.

Foreign airlines can now invest up to 49 percent in any of the private domestic carriers like Jet Airways, SpiceJet and Go Air.

Foreign carriers were not allowed so far to directly invest in Indian carriers for security reasons, although 49 percent FDI by non-airline players was allowed.

According to civil aviation ministry sources, the directives for the implementation of the policy will be issued within a month.

When contacted, international airlines such as Emirates welcomed the move.

“We always welcome any reform which liberalises markets, including FDI rules. India is one of world’s most important aviation markets,” an Emirates spokesperson told IANS.

Another Middle East airline Etihad Airways, however, was cautious in its reaction. The airline said it will wait for all the modalities of the new reforms are clear.

“It is our policy not to comment on such speculation. If or when we do make further investments of this sort, we will announce them in line with regulatory and commercial requirements,” Etihad Airways said in a statement.

Etihad Airways has investments in AirBerlin, Air Seychelles and Aer Lingus.

The news came after the equities markets closed. However, in anticipation of the policy development, scrips of the three listed airlines - Kingfisher, Jet Airways and SpiceJet - closed on a high.

The Kingfisher Airlines scrip on the Bombay Stock Exchange (BSE) ended up 7.88 percent at Rs.10.81 a share. The scrip touched a high of Rs.11.40.

Kingfisher promoter Vijay Mallya is betting on the FDI clearance to bail out his cash-strapped carrier.

“I am an avid supporter of FDI. I don’t see any reason why FDI from strategic partners like an airline should be banned or not permitted. Who would understand an airline better than another airline,” Mallya had said.

Jet Airway’s scrip closed up by 1.97 percent at Rs.368.35. The scrip touched a high of Rs.381.80 in the trade.

Budget carrier SpiceJet saw a 4.39 percent increase and stood at Rs.34.50. The stock climed to a high of Rs.35.80.

A group of ministers (GoM) headed by then Finance Minister Pranab Mukherjee had agreed Jan 17 to draft a cabinet note proposing a 49 percent cap on FDI by foreign carriers in domestic airlines.

Before that decision, various departments had proposed different investment caps - from 24 percent to 26 percent.

Related Stories

Tags: , , , , , , , , , , , , , , , , , , ,

Posted in Business |

Subscribe