FE Edirorial: Don't carry any carrier

Sat, Nov 7 01:51 AM

As of now, foreign airlines are barred from holding direct or indirect stakes in domestic carriers. On November 17, however, a committee of secretaries—set up to consider FDI in sensitive sectors—will discuss a proposal to allow foreign airlines to take up to 49% equity in Indian carriers. Such a decision could breathe life into the loss-ridden aviation industry. It could supply not only much-needed funds to a starving sector, but also necessary expertise for better running a business that's turning tougher by the day. Some private carriers like Jet—India's largest private airline—have been stiffly opposing such a move, saying the current environment isn't particularly good for getting good valuations. Indeed, Jet, Kingfisher and Spicejet—the three major listed players—have just ended another quarter seeing red. And, in time, the latest liberalising move may indeed spell doom for some domestic players. But, why should a government that's finally moving more public sector babies into the glare of the stock market sun keep shielding the private sector? But also think: such a position smacks of hypocrisy as long as Air India keeps getting one quasi bailout after another, with nary an improvement in efficiency, accountability or corporate governance. So, another meeting that we will be paying close attention to is the Pranab Mukherjee-headed GoM that will review the aviation ministry's request to infuse funds into Air India.

In an accomplishment announced with much fanfare, AI was invited to join the prestigious Star Alliance around a couple of years ago. As of US carrier Continental Airlines joining it late last month, the alliance now operates more than 19,500 flights every day from as many as 1,071 airports in 171 countries. It makes available to customers the best of product offerings, and gives to participating carriers both access to new markets and enhanced revenues. But for want of meeting the alliance's minimum standards—both technological and otherwise—Air India's formal induction into the alliance has been pushed back. Any organisation that wastes such opportunities in such an irresponsible fashion needs harsh hauling up. If private carriers are expected to compete globally, so should the government-backed carrier. Today, the aviation sector is suffering globally. If the Indian industry is projected to lose $1.5 billion this year (42% of Asian carriers' losses), the global industry will probably end up $11 billion in the red. But policymaking has to prepare for the turnaround that lies ahead, where the fittest will endure the best. It has to be fair.

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