Foreign Airlines Bullish On Indias Aviation Market

Friday, 27th September 2013 at 11:37am

The interest of foreign airlines in India's aviation market is growing these days after the government relaxed its policy on foreign direct investment in aviation business late last year.

The aviation industry of the country was in trouble in the last seven years as most of its local airlines suffered heavily due to mounting debts and operational losses caused by skyrocketing fuel prices, stiff airport fees and cut-throat competitions. Kingfisher Airlines was the first casualty of the aviation crisis as it was unable to take off the ground again after it ceased operations in September last year.

The crisis has alarmed the government and immediately made an effort to save its aviation industry from further trouble and quickly amended its FDI policy hoping to attract foreign investors to infuse much-needed capital to the industry. The new FDI policy now allows foreign airlines to own up to 49% stake in a local airline. Prior to the amendment, foreign investors were allowed to own up to 24% only of the total stakes.

In less than half a year later, AirAsia Bhd entered into the picture and announced its partnership with India's largest business conglomerate, Tata Group, to set up a local subsidiary of its successful budget airline brand, AirAsia.

The joint venture, though controversial, got the approval from the regulatory board in April and is now poised to launch its maiden service before the year ends.

Before the disclosure of the AirAsia and Tata Group partnership, there was a persistent rumor about the possible entry of a Gulf-based carrier into the Indian aviation market via stake purchase of a local airline.

A few months later, Jet Airways officially announced its partnership with Etihad Airways, the Abu Dhabi-based airline, through the latter's purchase of a 24% stake in Jet Airways.

Lately, another foreign-based carrier, Singapore Airlines, has inked a memorandum of agreement with Tata Group to set up a full-service airline in India.

According to an aviation consultant, the entry of the three foreign-based airlines into India's aviation market will usher in more airlines based overseas to invest in the local aviation industry.

Foreign airlines are seeing the potential of India's future aviation market. The country's large population which is hitting a billion soon. Its growing economy fuels demand for air travel. According to statistics, India's air travel market is only 3% of its current total population or 45%. According to estimates, however, it will grow ten times over to 450 million in ten years' time.

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