The Cabinet will consider a proposal on Friday to allow foreign airlines to buy stakes in local carriers, moving forward with a much-delayed reform that could revitalise debt-ridden domestic carriers.
Following the news, scrips of Kingfisher Airlines, SpiceJet and Jet Airways surged up to 5.3% on the Bombay Stock Exchange on Thursday.
Under current rules, foreign airlines are barred from buying stakes in domestic carriers, although foreign investors are allowed to hold a cumulative 49%. If the proposal is approved, foreign airlines would be allowed to buy similar-sized shareholdings.
"This is a good policy move. Markets are waiting for some policy action on three fronts: diesel hike, FDI in aviation and retail," said Hitash Dang, vice-president at Jaypee Capital.
Domestic carriers are laden with $20 billion (Rs. 110,000 crore) in debt and lost $2.5 billion (R13,750 crore) in 2011-12, according to the Centre for Asia Pacific Aviation.
Domestic carriers, led by struggling Kingfisher Airlines, have long lobbied for the move, which they hope would provide much-needed funds to keep them afloat. "We are really hopeful of FDI in the industry. If it comes, we will welcome it," said a spokeswoman for SpiceJet. "But a lot of talk about FDI has been going on recently. We will wait and see until after the meeting."
SpiceJet in talks with Gulf carrier
Dubai: SpiceJet has held "preliminary discussions" with a Gulf airline for potential investment, the Arabian Business reported on Thursday. "There have been preliminary discussions to check in principle whether there is interest on both sides and the confirmation there would be 'yes there is'," said Neil Mills, CEO, SpiceJet.
With PTI and Reuters