Cabinet to take up aviation FDI today

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.

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.

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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."

With PTI and Reuters