NEW DELHI: Operating through a tough financial environment, Indian carriers see a ray of hope in the government proposal to allow foreign airlines to invest funds and expertise in them so as to bring back the zing in the sector.
“A market growing at over 15 percent, huge untapped market in the interiors, growing per capita incomes and propensity to fly make India an attractive aviation market to be in,” said Amber Dubey, a director in global consultancy firm KPMG.
Civil Aviation Minister Ajit Singh will move a cabinet note seeking 49 percent foreign direct investment (FDI) by foreign carriers in domestic airlines. The Group of Ministers will take up the issue of direct ATF imports and discuss plans to revive the aviation sector.
Currently, the government allows for FDI up to 49 percent in Indian carriers by non-airline players but bans foreign airlines from directly investing for security concerns.
But would foreign carriers be keen to invest in a bleeding sector where three listed players — Jet, Kingfisher and SpiceJet — are reporting heavy second quarter losses?
Industry watchers say ‘yes’. The Indian aviation market is one of the fastest growing in the world. Last year, it expanded by 20 percent.
And the current downturn makes valuations attractive. “Those who wait and watch may have to pay a higher price later,” Dubey told media.
But a deterrent for foreign carriers could be the plethora of state sales taxes which make jet fuel one of the costliest in the world.
Dubey said that bold steps were needed for a turnaround in the sector. These include rationalization of taxes imposed on air turbine fuel (ATF) and maintenance, repair and overhaul (MROs) facility.
According to International Air Transport Association (IATA) estimates, the Indian aviation sector would require $140 billion in the next 20 years to keep pace with the growing demand.