PM to meet airline chiefs. Is FDI on the cards?

Prime Minister Manmohan Singh is set to meet representatives from the aviation industry on Saturday. Chiefs of private airline industry had earlier expressed their desire to meet the prime minister and update him on the crisis ailing the sector.

Singh plans to discuss the airlines’ financial difficulties and a possible move to let overseas carriers buy into local airlines in tomorrow’s meeting. The government’s decision last evening to ease regulations in foreign investments in the retail sector has spurred optimism in the aviation sector favouring a similar move there as well.

[caption id=“attachment_140075” align=“alignleft” width=“380” caption=“India’s three listed carriers announced a collective loss of Rs 1,500 crore in the second quarter. Reuters”] [/caption]

The Cabinet, it is learned, is planning to discuss a proposal to allow foreign carriers to buy stakes in local airlines.The aviation ministry has recommended that foreign airlines be permitted to purchase up to 24 percent stake in local carriers.

Kingfisher’s Vijay Mallya, Jet Airways’ Naresh Goyal and Rahul Bhatia of Indigo Airlines are expected to attend the meeting. The airline industry is demanding the sales tax on aviation turbine fuel to be lowered. Now, it is anywhere between 22-33 percent.

Earlier this month, Kingfisher Airlines faced the flak of the investors and support industry following cancellation of over 50 flights across the country. Following news of cancellations, rumors started spurring about a possible bankruptcy of the airlines.

Kingfisher Airlines which become India’s No 2 private carrier since it began operations in 2005, was a casualty of high fuel costs and a fierce price war between a handful of airlines. Speaking on the sidelines of SAARC, in Maldives, Singh had expressed concern over the plight of the airline and had said “we have to find ways to get Kingfisher out of trouble”.

Reacting to the news of a possible bail-out by the government, the Bharatiya Janata Party? had vehemently opposed any government grant or bailout to a private airline.

Kingfisher’s woes brought the impending crisis to the fore. It is rumoured that Jet Airways could be the next victim. The aviation industry is hit hard with high fuel prices and taxes. Most of the airlines, it is said, are running in losses.

While, Kingfisher’s debts are pegged at Rs 7,000 crore, the government national carrier has an outstanding debt of nearly Rs 44, 000 crore. India’s three listed carriers - SpiceJet, Kingfisher and Jet - announced a collective loss of Rs1,500 crore. All the airlines together have a debt of Rs 80,000 crore in their books.