Finally, airlines can now look at foreign direct investments (FDI) as a source to make its business more profitable.
The Cabinet Committee on Economic Affairs in India has approved the proposal of the Department of Industrial Policy and Promotion for permitting foreign airlines to make upto 40% investments in scheduled and non-scheduled air transport services.
The new limit will subsume FDI and Foreign Institutional Investments (FII).
So far, foreign airlines were allowed to participate in the equity of companies operating cargo airlines, helicopter and seaplane services, but no investments were allowed in scheduled and non-scheduled air transport services.
The investments will have to comply with the relevant regulations of Securities Exchange Board of India (SEBI) and will have further conditions for approval. A scheduled operators permit will be granted to a company that is registered and has its principal place of business within India, the Chairman and at least two-third of the Directors being citizens of India and substantial ownership and effective control vested in Indian nationals.
he ruling is expected to have a major impact on India’s cash-strapped carriers, including Kingfisher Airlines, with several major international airline groups now expected to make a move into the Indian market. The BA-led International Airlines Group (IAG) is rumored to be interested in Kingfisher, while Abu Dhabi-based Etihad Airways is also believed to be considering an investment in an Indian airline.
“This will open up a wide range of opportunities for both Indian carriers and foreign carriers who wish to participate in the strong growth potential for Civil Aviation in our Country. Kingfisher will now be able to re-engage with prospective Airline investors in a more meaningful manner and move towards re-capitalization and ramp up of operations,” an official statement from Kingfisher Airlines stated.