FDI reform lifted mood in aviation industry: Ajit Singh

September 21st, 2012 - 5:40 pm ICT by IANS  

New Delhi, Sep 21 (IANS) Civil Aviation Minister Ajit Singh Friday said the government’s open-sky policy for foreign investment in domestic airlines has positively affected sentiments in the aviation industry, but it is too early to say how much investment the sector would attract.

“The sector is going through difficult times and is facing financial stress due to the overall economic slowdown. But the mood is upbeat now after we (government) allowed 49 percent FDI in airlines,” Singh told reporters on the sidelines of an Assocham event here.

“Time will tell how many foreign airlines are interested,” Singh added a day after the government notified that the foreign airlines can now pick up 49 per cent stake in domestic passenger carriers.

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

The Indian airlines sector has been going through a tough operating environment as high fuel and interest cost have hurt it. The government expects that the decision will help bring in more funds to the airlines who have been cold shouldered by banks.

The decision is particularly expected to help airlines like Kingfisher to gain capital and resume full services. Other Indian carrier’s require funds for expansion and to gain market share.

International airlines have welcomed the government move. Ccarriers like Singapore Airlines, Emirates and the International Airlines Group (IAG), which owns British Airways and Iberia, have said they do not have any immediate plans to invest in India.

Virgin Atlantic and Lufthansa also said they were not keen on investing in India at the moment.

Middle East airline Etihad Airways has said it will wait for all the modalities of the new reforms are clear.

Several such overseas carriers contacted by IANS and aviation watchers said high jet fuel cost, an extremely price-sensitive market, huge debt of the carriers and contracting domestic passenger traffic are the reasons deterring them to invest.

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