Can FDI make sick airlines fly high again? Industry divided

The decision on whether to allow foreign direct investment (FDI) in aviation, has now reached the union cabinet. But the industry itself seems divided on whether this reform, if and when it's introduced, can make loss-making carriers fly high again, reports CNBC-TV18's Swati Khandelwal Jain.

It could help debt-laden Kingfisher Airlines stay afloat and steer other carriers away from turbulent times. It's foreign investment in Indian airlines. With the GoM giving a green signal to 49% FDI in aviation, it's now upto the union cabinet to give the final nod.

But, will it? In an exclusive interview to CNBC-TV18, the new civil aviation minister Ajit Singh sounded cautiously optimistic.

You can never say that cabinet meet is a formality. We will get comments from each minister before the note is prepared so we will know and we can only hope that cabinet will pass it," he adds.

But even as the cabinet's decision is awaited, the industry reaction has been mixed so far. While KFA has been lobbying hard for this reform as this will help it gain access to more capital, others hold divided opinions.

It will create a great effect to capital; it will create a stronger platform for best practices already implemented abroad. India is definitely a big market with huge potential for growth in the airline business and it's pretty easy to expect a great interest from foreign airlines to invest in India.

Girogio De Roni, CEO, GoAir says, "It will create a great effect to capital, it will create a stronger platform for best practices already implemented abroad. And India is definitely a big market with huge potential for growth in the airline business and it's pretty easy to expect a great interest from foreign airlines to invest in India."

Captain Gopinath, founder chairman and MD, Deccan 360 says, "FDI in aviation may not help Kingfisher Airlines much; not many takers for airlines with huge debt; huge consumer base in India attracting foreign airlines."

And indeed, with most Indian carriers seeing their bottomlines sink deeper into the red, the question does arise. If at all foreign airlines would want to invest in the loss making sector at all. On their part, US and European airlines are already cutting corners to sustain their business. So, the hope is pinned mostly on players from the Middle East who are cash rich and want a bigger India presence.