Coming, not coming, coming, not! Finally, airlines in India are going to get the lifeline they were hoping for a long time. The Government of India finally took the measure to allow Indian scheduled carriers (Air India, Jet Airways, Kingfisher Airlines, GoAir, Indigo, SpiceJet) to seek foreign equity infusion upto 49% of their equity capital from foreign airlines.
Here is what the presser from the Government of India says:
The Cabinet Committee on Economic Affairs has approved the proposal of the Department of Industrial Policy and Promotion for permitting foreign airlines to make foreign investment, up to 49 percent in scheduled and non-scheduled air transport services.
Removing the existing restriction on investment by foreign airlines would assist in bringing in strategic investors into the civil aviation sector. Higher foreign investment inflows are necessary at the present juncture, in order to strengthen the sector. Introduction of global best practices, concomitant with the induction of FDI from foreign airlines, is expected to lead to higher service standards, international best practices and induction of state-of-the-art technologies, in the air transport sector.
Until now, foreign airlines were allowed to participate in the equity of companies operating cargo airlines, helicopter and seaplane services, but not in the equity of an air transport undertaking operating scheduled and non-scheduled air transport services. The Government has now permitted foreign airlines to invest, under the Government approval route, in the capital of Indian companies operating scheduled and non-scheduled air transport services, up to the limit of 49 percent of their paid up capital. The 49 percent limit will subsume FDI and FII investment. The investments so made, would need to comply with the relevant regulations of SEBI, such as the Issue of Capital and Disclosure Requirements (ICDR) Regulations / Substantial Acquisition of Shares and Takeovers (SAST) Regulations, as well as other applicable rules and regulations.
Such investment would further be subject to the conditions that:
(i) A Scheduled Operator’s Permit can be granted only to a company:
a. That is registered and has its principal place of business within India,
b. The Chairman and at least two-thirds of the Directors of which are citizens of India, and
c. The substantial ownership and effective control of which is vested in Indian nationals.
(ii) All foreign nationals likely to be associated with Indian Scheduled and Non-Scheduled air transport services, as a result of such investment, shall be cleared from security view point before deployment, and
(iii) All technical equipment that might be imported into India, as a result of such investment, shall require clearance from the relevant authority in the Ministry of Civil Aviation.
Now, the talk of the town for long has been that the politician and owner of Kingfisher Airlines, Dr. Mallya is going to benefit the most from this move since his airline has been in the doldrums for about a year now, forced to cut capacity and run a skeletal schedule till the government made up its mind on the issue.
Like you would see, the government has put in several safeguards, for the simple reason that it thinks of aviation as a sensitive sector and hence national security issues need to be taken care of.
Financially-distressed Kingfisher Airlines has been in the talks with many a suitors, and the prominent guess going around is British Airways (IAG), its sponsor in oneworld and an airline very close to Kingfisher Airlines. Though there is not much of promoter equity left to give away to anyone else interested in investing at this moment. There is also the whisper of a Middle-East carrier being interested, but which one, is yet to be ascertained. Qatar Airways, on the other hand, seems to be talking to SpiceJet for putting its money there.
This investment is still not a closed chapter, but at least a big progressive step!