Though the government may have allowed foreign carriers to invest in cash-strapped domestic airlines, it is unlikely to usher in benefits unless issues of high-taxes and infrastructure cost are addressed, says global airlines body IATA.
Nonetheless, the decision is positive and opens up wider opportunities for overseas players in the segment for collaboration with the domestic airlines, it said.
"Allowing foreign direct investment by global airlines by itself is not a panacea.
"The critical problems of a high cost environment, insufficient infrastructure and crippling taxes must also be addressed within a coordinated government wide policy framework," International Air Transport Association (IATA) India director Amitabh Khosla said.
Stating that the 49% FDI decision is an important step forward, Khosla said it allows domestic carriers to have strategic tie-ups with foreign airlines cemented by an equity stake.
The move, that has received both bouquet and brickbats by the government last Friday, has thrown open the FDI floodgates to the tune of 49% equity participation in domestic airlines.
While India Inc has hailed the decision, Opposition BJP and Left parties as also some allies like Trinamool have sharply criticised the move terming it as "decision taken under pressure from the India Inc".
Sydney-based aviation think-tank Centre for Asia Pacific Aviation (CAPA) and founder of the low-cost airline model Capt GR Gopinath have earlier expressed similar sentiment, calling for rationalisation of taxes and putting up a seamless infrastructure to reap the benefits of overseas investment in the airline sector.
"It is good for the industry and the common man. We need more airlines and this move will bring a number of overseas carriers to India.
"But at the same time, there are some issues like GAAR, retrospect tax amendment and others which are around and for the prospective investors," Gopinath said.