FDI in Indian Aviation: An impact analysis case study

There has been a long debate going on from the last few months on the approval of FDI in Indian Aviation. The Indian aviation ministers along with the aviation business heads are discussing its pros and cons. Let us discuss some of the few points that may impact the ministry’s decision on the approval of FDI policy:

· FDI in aviation may benefit the cash-strapped Indian carriers such as Kingfisher that is struggling with mounting debts. The airline said “It is already in talks with some of the foreign carriers that might invest in Indian aviation after the FDI approval”. However the investment by foreign carriers in Indian aviation market is unlikely as they will not have complete control of the Indian carriers.

· Rising ATF prices has increased the air fare in the last two years. This move to allow FDI may result in further increase in air fare making air travel costlier for common man.

· Government has already structured a bail out plan for debt-laden Air India. However, it is difficult to say how FDI in aviation will help the Indian national carrier.

· Delhi airport has increased its tariff structure by 353 percent recently that will be implemented from 15^th May. This will result in increasing the air fare and will make the airport costlier for Indian carriers. Analyzing the current tariff structure at Delhi Airport, allowing FDI in aviation may result in increasing tariff at other airports as well.

· Current Indian aviation industry is facing infrastructure shortage to handle the existing fleet of Indian carriers. The airports in tier-II and tier-III cities are still under development due to fund and land issues. FDI in Aviation will demand huge infrastructure to accommodate the big size aircrafts and upgraded technology of the foreign carriers. The ministry needs to address these issues first before giving nod to FDI in aviation sector.