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Foreign airlines can own up to 49% in Air India: Government

Jan 10, 2018, 14:11 IST

NEW DELHI: The government on Wednesday allowed foreign airlines to invest up to 49 per cent in Air India, paving the way for Indian players to tie up with foreign airlines to bid for it. While opening numerous possibilities, this also clears the way for Tata Sons-Singapore Airlines JV Vistara to bid for AI and also for IndiGo to tie up with a foreign airline (like Qatar Airways) to do so, if IndiGo wants to.

“Foreign airlines allowed to invest up to 49 per cent under government approval route in AI as well. Substantial ownership and control (SOEC) of AI shall continue to be vested in Indian National. Foreign investment(s) in AI, including that of foreign airlines, shall not exceed 49 per cent either directly or indirectly,” the government said in a statement about Cabinet decisions taken on Wednesday.

This decision removes the confusion caused by a consolidated foreign direct investment (FDI) policy released last August which said that while foreign carriers can own up to 49 per cent stake in Indian carriers, this was “not applicable” to AI. The SOEC clause means that foreign airlines have up to 49 per cent stake in a JV Indian carrier with the Indian partner having at least 51 per cent stake in it. This model is followed by both the Tata JV airlines where Singapore Airlines and AirAsia Berhad have 49 per cent stake in Vistara and AirAsia India, respectively.
Vistara CEO Leslie Thng had last week said the airline’s promoters had an open mind (to bid) for AI if it made business sense. Now with the Cabinet on Wednesday clarifying foreign airlines can own up to 49 per cent in AI, Vistara can bid for the airline. SO can Jet Airways which has Abu Dhabi-based Etihad as 24 per cent stake holder. IndiGo, which has formally given expression of interest for AI, can tie up with a foreign airline if it wishes to do so. There has been talk that Qatar Airways may tie up with IndiGo. But both the airlines have not commented on that so far.

The International Civil Aviation Organisation (ICAO) says that an airline’s SOEC should be with the nationals of a country if such an airline wishes to fly out of that country. The issue of SOEC being with Indians arises at two times — issuing license and later giving bilateral rights that India has to its airline for flying abroad.