FDI in Indian Aviation: A Boon or Bane {let’s view the commentary}

Let’s view the comments from various Aviation Ministers and Business Corporates on the hot market topic “FDI in Aviation sector”.

Minister’s view: “Prime Minister Manmohan Singh, Finance Minister Pranab Mukherjee, Commerce Minister Anand Sharma and Aviation Minister Ajit Singh are in favour of FDI but there are concerns within the government over the Mamata Banerjee-led Trinamool Congress (TMC) opposing the proposal.”

Planning Commission deputy chairman, Montek Singh Ahluwalia: “While I am in favour of FDI in retail, I am also in favour of FDI in aviation. There are many things that do not require legislative change. That’s what we should be focusing on right now.”

 

Kapil Kaul, India head of the Centre for Asia Pacific Aviation: “Not all Indian carriers may benefit from government's move to allow FDI in aviation. Because of their large foreign ownership, Jet and IndiGo are unlikely to be eligible for FDI from foreign airlines. Others such as Kingfisher, GoAir and SpiceJet can expect fresh funding through this route”.

Anand Kumar and S Arun of Bank of America Merrill Lynch (BoAML): “While the FDI may pump in cash into the sector it will not change the industry dynamics materially in the near term. We believe the regulation, which is being taken up on an urgent basis to save the sinking Kingfisher Airlines (KFA), may lead to overcapacity in the aviation sector. If KFA is able to secure a foreign partner, it would likely bring back the grounded capacity back into the system which could again create oversupply. Additionally, the government has approved the turnaround plan for Air India. This would likely enable AI to expand operations and play the market-share game which may hurt the industry. Meanwhile, low-cost airline SpiceJet is already flooded with offers for investment from West and Southeast Asian carriers.”

Neil Mills, chief executive officer of SpiceJet: “Several Gulf and Southeast Asian carriers are interested in the carrier. FDI by an airline is an option, but I deny initiating any discussion with any foreign airline.”

Sharan Lillaney, Angel Broking: “SpiceJet will be most positively benefited from foreign direct investment in the aviation space because of its low debt levels and strong presence amongst low cost carriers. After SpiceJet, I expect Jet Airways to benefit from FDI because of its strong international presence as well as domestic presence. Kingfisher will also be benefited, but only if they go in for a complete restructuring of their debt. I think the company will have to convert part of their debt into equity, only post that can they expect a foreign airline to buy stake and infuse capital in the company.

Airline’s view: “FDI approval would allow cash-strapped domestic airlines like Kingfisher Airlines to access funds more easily. Indian airlines have been battered by rising fuel costs, high taxes and fierce competition in a market where five of the six main operators are losing money. Kingfisher Airlines and GoAir are in favour of FDI but Jet Airways and Indigo oppose it.”

Come on Friends!! Let’s post our comments too on this topic.