The government on Thursday notified the rules allowing foreign airlines to invest into domestic airlines. However, the rules are not applicable to Air India making it clear that government will remain its owner.
Though 49% FDI was permitted foreign airlines were debarred from investing in Indian carrier, domestic airlines reeling from mounting debt and losses lobbied for a change in rules which was approved in the cabinet meeting last Friday.
Anticipating the the change domestic airlines including Jet Airways, Kingfisher and SpiceJet have held series of discussions with Gulf carriers seeking partnerships and investment.
Under the revised rules foreign airlines can invest but such investments will not be through automatic route. The chairman and two-third of directors of the airline securing investment will have to be Indian citizens. Clearance from the home ministry and Foreign Investment Promotion Board will be required, he added.
The foreign investment would be subject to other conditions, including substantial ownership and effective control of the airline being vested in Indian nationals. All foreign nationals associated with the Indian company as a result of the investment will have to undergo security clearance and all technical equipment imported into India following the investment, too, will require civil aviation ministry clearance.
The move, however, say analysts, is not expected to see the floodgates opened for investment by foreign carriers. For, most domestic carriers looking for money are financially strained and might not be attractive targets for investors. However, it does bring a positive environment to a sector where companies are reeling under financial pressure.