• 100% FDI in airlines: Air India will have to shape up or ship out

    The opening up of Indian Airlines to 100 percent foreign direct investment (FDI) came today after a lot of hesitation and dire warnings of compromising – what else – the nation’s security by allowing foreigners control in a sensitive sector.
    For years we have been paranoid about security implications of allowing foreigners in the cockpit as far as our airlines are concerned, so much so that the first such step in 2012, when FDI by foreign carriers was allowed but capped at 49 percent, was also widely seen as a government bowing to the wishes of some powerful global airlines.
    Today’s announcement, which allows up to 100% FDI in schedule airlines and regional carriers subject to government approval, has the potential to bring remarkable changes to India’s aviation sector in the near future. As per a government release, foreign airlines can still pick up only up to 49% equity in Indian carriers. This should not be a problem since the remaining can be bought by an entity like a sovereign fund of the country the purchasing carrier belongs to, taking effective control to 100%.
    That India needs FDI is a no brainer. That it will help almost all sectors including civil aviation is also obvious. So the downside to this decision of allowing up to 100% FDI in Indian airlines seems to be limited.
    Perhaps Air India may now find that the virtual monopoly it had over overseas routes gradually recedes as stronger, deep-pocketed foreign players may set up ventures in India (or buy out existing ones) and take over lucrative foreign routes. Air India may need to pull up its socks but for private airlines, there should be little cause for concern. Matt Duchene Jersey

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