Airlines await help to fly out of turbulence
There is talk in the industry that the government may allow foreign airlines to invest up to 26 per cent in domestic airlines within an overall limit of 49 per cent for foreign direct investment in the sector, writes Lalatendu Mishra.india Updated: Feb 16, 2009 22:59 IST
“There was no expectation from this interim budget when the last budget was silent on aviation. But we expect a host of announcements before the elections,” says Kapil Kaul, CEO Indian subcontinent & Middle East, Centre for Asia Pacific Aviation, a global aviation consultancy.
There is talk in the industry that the government may allow foreign airlines to invest up to 26 per cent in domestic airlines within an overall limit of 49 per cent for foreign direct investment (FDI) in the sector.
The announcements of a new airport at Navi Mumbai and fresh equity infusion in Air India are also on the cards.
Though the aviation ministry has been pressurizing private airlines to slash airfares in line with reduction in jet fuel prices, the grim economic reality is that all airlines are deep in the red, and expected to lose more than Rs 8,000 crore this year. This is in addition to the thousands of crores of accumulated losses over the years. The economic slowdown hit airlines hard when they were flying high with global ambitions and riding on local demand.
“The industry needs an immediate capital infusion of $1.5 billion (Rs 7,500 crore) to stay afloat,” Kaul said. Jobs are at stake and pay cuts have already put in place.
This sector which was on nobody’s radar gained prominence from 2004 and grew by 30 per cent a year till March 2008, making it a major employment generator. However, in the past 10 months, it witnessed a contraction of 15 per cent. Airline executives are hardly in a mood to talk.
“The current scene is pretty bad. With little help, this sector can bounce back and grow in the next five years,” said Ankur Bhatia, executive director of Bird Group.