Can FDI Rescue Air India?

Air India, being the flag carrier airline of India has not performed up to expectations. Private airlines have taken over the air space. Air India has been battling the never ending flight delays, technological deprivation, and low services provided. A step has been taken by the centre to change the dynamics of a once truly proud airline.

Can FDI Rescue Air India?
Can FDI Rescue Air India?

Union Cabinet on Wednesday enabled foreign airlines to own up to 49 per cent in Air India. Air India’s losses, will need to be well analysed and only 49% stake will be allowed in ownership by the foreign airlines.

A quote by a senior from a foreign carrier revealed that overseas airlines would be very interested in an airline like Air India.

“There are two primary reasons for it one is that the government is likely to take away a major part of the debt from Air India, making it lucrative financially;  and second is the access to the Indian market that an airline gets by acquiring Air India.”

Indian carriers have a lot of average thanks to the Indian market being very highly populated and with many travellers both domestically and internationally. India is very much a continent in terms of population and the number of airports that exist.

If a foreign carrier is able to take control of Air India, the advances would be enourmous. The investment and responsibility will raise Air India to international levels, which it once was very proud of withholding.

Certain problems such as certain routes accessible only to Air India will need to be discussed along with the airlines current financials such as working capital debt.

In the airline business rising fuel costs and  labour costs have lead to competition in marginal basis. The rise of travel portals have made Airlines compete in fare prices. There is also the issue of 60% of the revenues which Air India gains as revenues to be pocketed by the foreign airlines.

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Congress and the Communist Party of India have shown signs of disagreement to the new change of policy for Air India . Narendra Modi decision of allowing 100% FDI through automatic route in a single brand was done just before the Davos Summit which justifies countries economic moves and conditions.

Modi and a team of economic specialists will be travelling to Davos, Switzerland for the World Economic Forum Summit later this month.