Air India can now be part-owned by foreigners
Air India's debt may make it an unattractive buy, but that doesn't stop the government from pitching its assets to foreign investors. The government of India paved way for 49 per cent FDI in the national carrier, with a rider that the ownership would remain in Indian hands.
Affirming the belief that Foreign Direct Investment (FDI) is a major driver of growth and a source of non-debt finance for the economic development of the country government has permitted 100 per cent FDI through the automatic route in most sectors and activities on Wednesday.
Prior to this amendment, foreign airlines were allowed to invest in the Indian companies operating scheduled and non-scheduled air transport services under the approval route up to the limit of 49 percent of their paid-up capital. But this provision was not applicable to Air India as it was the national carrier.
Recently, the Virgin Group founder Richard Branson admitted having missed the opportunity to invest in the Indian airline industry in an interview. With the likes of Etihad Airways already active in India with a partnership with Jet Airway, Air India is poised to attract considerable interest from foreign investors who actually are waiting to have a share of the Indian aviation pie.
The Tata Group had expressed interest in the Maharaja's assets. It is expected that Tata-Singapore Airlines joint venture which runs Vistara, will bid for AI. AirAsia also might be interested in bidding for AI's assets.
The domestic budget airline, IndiGo, which is operated by Inter Globe Aviation, was the first company to express interest in acquiring the assets of Air India, which seemed to have not pleased its shareholders. The company later clarified that it is only interested in the international operations of Air India, which meant getting access to the Star Alliance tag and prime slots at major international hubs.
In domestic air passenger traffic in India has grown at 17.27 per cent during the January-November 2017 period. This increase in traffic has helped airlines post good quarterly figures and expand their operations by placing orders for new aircraft to cater to the rising demand.
The only deal spoiler is Air India's debt of nearly Rs. 52,000 crore. The airline has managed to increase its operating profit to Rs. 215 crore in the last fiscal. In 2016-17, the airline registered a net loss of Rs. 3,643 crore, while operating profit was at Rs. 215 crore, as per provisional figures.