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Foreign airlines may own stakes in Indian carriers

 
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karatecatman
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PostPosted: Thu Jan 01, 2009 12:44 pm    Post subject: Foreign airlines may own stakes in Indian carriers Reply with quote

http://tinyurl.com/75yy3v
TIMES OF INDIA
Foreign airlines may own stakes in Indian carriers

1 Jan 2009, 0222 hrs IST,
Nirbhay Kumar, ET Bureau

NEW DELHI: The government is considering a proposal to allow foreign airlines such as Singapore Airlines, British Airways and Lufthansa to pick up equity stakes in domestic carriers, but with riders.

It is preparing the ground for a major policy shift on foreign ownership in aviation. Government sources say foreign airlines may be allowed to own a 20-25% stake in local carriers, but their role on boards and in the management would be limited.

The civil aviation ministry had, in the past, argued that allowing larger foreign airlines to own stakes in fledgling Indian carriers could cause harm to the domestic aviation sector.

“Things have changed. Earlier, only one Indian airline operated internationally. But now, three domestic carriers fly to foreign destinations. Our carriers have grown in size and scale in three to four years’ time. We don’t think the earlier concerns are relevant. If foreign telecom companies can buy stakes in Indian telecom companies, why can’t foreign airlines pick up stakes in domestic airlines?” a government official asked, on the condition of anonymity.

Civil aviation minister Praful Patel told ET that a proposal to allow foreign ownership of Indian operators is under discussion, as the government looks at measures to revitalise the sector.

“Allowing foreign airlines to hold stakes in domestic airlines has always been an option. There is no firm decision yet, though. Internationally, in most cases, foreign direct investment by entities other than airlines is allowed only (to the extent of) 49%. In case of foreign airlines, FDI is not allowed (to be) more than 25%,” he said.

Cash-rich carriers such as Singapore Airlines have evinced interest in owning stakes in local airlines, but have been prevented by foreign investment rules.

While overseas airport operators, flying training services providers and ground handlers are allowed to invest in their respective domestic segments, foreign airlines are barred from investing in local airlines. However, foreign companies other than airlines are allowed to hold up to 49% stake in domestic carriers.

Indian carriers, which are struggling to survive in the face of a cash crunch and mounting losses, have clamoured for access to funds from foreign airlines.

“Because of the liquidity crunch and airlines’ poor financial health, banks or private equity firms are not interested in investing in airlines. However, foreign airlines with a sound financial background are keen to invest, as it offers a business opportunity and a larger market, besides complementing operations,” the official said.
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Nimish
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PostPosted: Thu Jan 01, 2009 11:12 pm    Post subject: Reply with quote

I hope this move goes through and we leave aside the paranoia about the aviation sector.
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HAWK21M
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PostPosted: Fri Jan 02, 2009 9:22 pm    Post subject: Reply with quote

Good move,considering the Financial situation.Also the expertise & modern equipment will assist in keeping with latest standards for Mx.
regds
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Kabir
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PostPosted: Fri Jan 02, 2009 9:30 pm    Post subject: Reply with quote

good, this should go ahead without any delay.

I know AF will be itching to get some pie from GoAir.
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The_Goat
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PostPosted: Fri Jan 02, 2009 10:36 pm    Post subject: Reply with quote

Good move but totally inadequate. No body is going to be happy with a 49% stake. They should allow complete takeovers by foreign carriers with full management control. It would not only bring in much needed investment in a sector that is thirsting for it, but would also allow Indian companies to exit the business should they find the need to (like the Ranbaxy affair), and recover their investment.
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sri_bom
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PostPosted: Mon Jan 05, 2009 11:20 am    Post subject: Reply with quote

British Airways is reportedly considering acquiring a 25% stake in India’s GoAir with company officials expected to meet in Feb-09 (Economic Times, 05-Jan-09). Rumours of a franchise agreement surfaced in late 2008. Foreign airlines are currently barred from holding direct or indirect stakes in Indian airlines. GoAir plans to increase its fleet to 35 aircraft by Mar-2011 from the current six. It plans to add 20 aircraft this year and add another nine in the following two years.

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sri_bom
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PostPosted: Wed Jan 07, 2009 7:36 am    Post subject: Reply with quote

India’s Finance Ministry stated the Indian Government is unlikely to change foreign airline ownership restrictions in local carriers before the upcoming Federal election (to be held by May-09) (Dow Jones, 06-Jan-09).

Indian Government: “It's too big a decision to be taken ahead of the elections. We don't think the government will go ahead with easing foreign direct investment rules now”, Unnamed Senior Finance Ministry Official. Source: Dow Jones, 06-Jan-09.

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iah87
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PostPosted: Thu Jan 08, 2009 8:53 pm    Post subject: Reply with quote

Upto 49% investment with approval from GOI and up to 25% investment without approval would be beneficial.

Presently many countries do not allow majority investment in their nation's airlines and I do not expect GOI to allow 50% or more investment.
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karatecatman
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PostPosted: Tue Jan 13, 2009 11:02 pm    Post subject: Reply with quote

On Doordarshan

GoI is considering 25% FDI. Issue may come up before PMO.
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G-BYGB
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PostPosted: Wed Jan 14, 2009 4:58 pm    Post subject: Reply with quote

The passage of this proposal will not be easy coz the Left will be desperate not to let this happen, even if they know it is in the interest of domestic carriers and the Indian aviation sector as a whole.
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