State explores possible alliance if FDI helps Air Kerala to overcome regulatory hurdles…
Foreign carriers have shown interest to invest in state-owned Air Kerala. The airline expected to start operations in April 2013 will fly between Kerala and Middle East countries. A tie-up with a foreign airline may help the start-up to fly overseas overcoming regulations which insist five years of domestic operations and a minimum fleet size.
Currently, Air Kerala, with an initial equity base of INR 200 crore, will be 26% state owned with non-resident Keralites and business groups holding the remaining shares valued at INR 10,000 per share. Ernst & Young is helping the Kerala government with a feasibility report on the airline project, which could dent Air India’s business on the profitable Gulf sector routes.
Last month, India allowed foreign airlines to buy 49% ownership in domestic carriers opening up possibilities for Air Kerala, which is being floated to offer competitive fares between Kerala and Middle East.
“We have received interest from certain foreign parties and we might explore a possible alliance if this helps Air Kerala to overcome regulatory hurdles,” Kerala Industries Minister P K Kunhalikutty told the Times of India. The minister said high airfares between Kerala and the Gulf was snowballing into a “social problem” with many workers unable to visit homes even once in two years. “We have already conveyed our sentiments to the Prime Minister,” he added.