Foreign Airlines May Get Nod to Bid for Air India: Report

India may change rules and allow foreign airlines to bid for Air India Ltd. as long as they have a local venture with an Indian partner. The government is looking to resuscitate the debt-laden national carrier by providing more suitors for its bidding, which is likely to include companies such as the Tata group and InterGlobe Aviation Ltd (IndiGo).

“Foreign airlines will be allowed to bid as per the current policy that’s applicable on all domestic airlines. That much we can confirm,” an official with knowledge of the matter said on condition of anonymity, reported livemint.com. The civil aviation ministry has forwarded the proposal to a group of ministers concerned with the matter, the report added. The panel is led by Finance Minister Arun Jaitley and includes Aviation Minister Ashok Gajapathi Raju, Transport Minister Nitin Gadkari, Railways Minister Piyush Goyal and Commerce Minister Suresh Prabhu.

The ministry has also told the department of investment and public asset management to speed up the process of the Air India privatization, said the official.

As per the existing rules, foreign airlines can own as much as 49 per cent in an Indian airline, with the exception of Air India. If foreign airlines are allowed to bid for the national carrier, the government will have to make several changes to the existing rules. To start with, the department of industrial policy and promotion’s Press Note No. 6 (2012 Series) has to be amended to remove a clause that bars foreign investment in Air India.

International flying rights negotiated between two governments require respective airlines to have local effective control to avail of these rights. A change in control to a foreign airline will invalidate these rights.

International Air Transport Association’s (IATA) Director General and CEO Alexandre de Juniac welcomed the Indian government’s decision to divest stake in the national carrier. “We support privatization of Air India. But the company has to be privatized in right conditions,” De Juniac said, reported Economic Times.

To ensure that Air India does not face any issues, the government will retain a clause saying Air India cannot be 100 per cent foreign-owned. Although foreign entities can own 100 per cent of a private Indian airline, the stakes of foreign airlines cannot go over 49 per cent.

De Juniac added that the Indian government should exit Air India. “For sale process, the government can keep a part stake initially but the government should eventually exit Air India,” he told ET. “The government could allow foreign carriers also to bid for Air India. We do not see any problem in countries owning stake in any other carrier, as various global carriers have such stake, recognizing that the government have to decide on the limits of it.”