News / Asia

Foreign Investment Could Boost India's Beleaguered Aviation Industry

Jet Airways aircrafts sit on the tarmac at the Santacruz domestic airport terminal in Mumbai, India (2009 File)
Jet Airways aircrafts sit on the tarmac at the Santacruz domestic airport terminal in Mumbai, India (2009 File)
Anjana Pasricha

India’s beleaguered aviation industry is hoping to be more profitable if the government allows foreign airlines to invest in the sector. So far, massive passenger growth has not translated into profits.

By the end of the financial year in March, India’s domestic airlines will have piled up losses of an estimated $2.5 billion. Coming on top of losses sustained in previous years, the aviation industry is deep in debt.

But the cash-strapped sector has finally heard some good news. A group of ministers this week agreed to allow foreign airlines to buy stakes of up to 49 percent in domestic carriers. The proposal - being seen as a lifeline for the industry - is expected to get formal approval in the coming weeks.

The Indian aviation industry is among the fastest growing in the world with traffic increasing by over 17 percent last year.  But the industry continues to lose money.

That is largely because aviation fuel prices - already high due to local taxes - have risen sharply. However airlines have been unable to offset those costs by raising fares due to cut throat competition in the sector.

“Because of certain carriers undercutting, the other carriers have no option but to match those prices, so sometimes you do have a ridiculous situation where you have flight tickets which are almost the cost of a train journey which itself defies logic," explained Amber Dubey, director of aviation at consultancy KPMG in New Delhi. "So breakneck growth happening but at the same time it is not profitable because it is actually coming on the back of ticket prices which are not sustainable.”

Five of India’s six main carriers, including state owned Air India, have posted losses.  Banks, to which they already owe large sums, are unwilling to make more loans.

But hopes have risen that foreign airlines will provide a much-needed cash infusion under the new law.

Foreign airlines have been eyeing the Indian market for some time.

Dubey says that India’s huge growth potential makes the aviation sector attractive despite its problems.

“The long-term opportunity is what the foreign airlines are going to punt on. Right now if you look at the global traffic that is not growing beyond three, four, or even five percent, it is low single digit growth," Dubey said. "It is countries like India, China, where the real growth is coming, this is where the populations are. And if you look at air travel penetration, we [India] are not even four per cent, it is not even the tip of the iceberg… So the long term outlook for India great, the economy is growing, the per capita incomes are growing, and with that comes the propensity to go for air travel.”

Buying stakes in local airlines will give foreign airlines access to smaller towns in the heart of the country. So far they can only fly into major metropolitan areas. In exchange,  Indian airlines will get access to global routes.

You May Like

Video China Investigates Powerful Former Security Chief

Analysts say move by President Xi is an effort to win more party support, take step toward economic reforms, removing those who would stand in way of change More

South Africa Land Reforms Still Contentious 20 Years Later

Activists argue that the pace of land reform is slow and biased; legal experts question how some proposed reforms would be implemented More

In Vietnam, Religious Freedoms Violated, UN Finds

Beliefs reportedly prompt heavy surveillance, intimidation and travel restrictions More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Gazans in Shelled School Sought Shelteri
X
Scott Bobb
July 30, 2014 8:16 PM
Israel's air and ground assault against Hamas-led fighters in Gaza has forced many Palestinians to flee their homes, seeking safety. But safe places are hard to find, as VOA’s Scott Bobb reports from Jabaliya.
Video

Video Gazans in Shelled School Sought Shelter

Israel's air and ground assault against Hamas-led fighters in Gaza has forced many Palestinians to flee their homes, seeking safety. But safe places are hard to find, as VOA’s Scott Bobb reports from Jabaliya.
Video

Video Rapid Spread of Ebola in West Africa Prompts Global Alert

Across West Africa, health officials are struggling to keep up with what the World Health Organization describes as the worst ebola outbreak on record. The virus has killed hundreds of people this year. U.S. President Barack Obama and other world leaders are watching the developments closely as they weigh what actions, if any, are needed to help contain the disease.
Video

Video Michelle Obama: Young Africans Need to Embrace Women's Rights

U.S. first lady Michelle Obama urged some of Africa's best and brightest to advocate for women's rights in their home countries. As VOA's Pam Dockins explains, Obama spoke to some 500 participants of the Young African Leaders Initiative, a six-week U.S.-based training and development program.
Video

Video Immigrant Influx on Texas Border Heats Up Political Debate

Immigrants from Central America continue to cross the U.S.-Mexico border in south Texas, seeking asylum in the United States, as officials grapple with ways to deal with the problem and provide shelter for thousands of minors among the illegal border crossers. As VOA's Greg Flakus reports from Houston, the issue is complicated by internal U.S. politics and U.S. relations with the troubled nations that immigrants are fleeing.
Video

Video Study: Latino Students Most Segregated in California

Even though legal school segregation ended in the United States 60 years ago, one study finds segregation still occurs in the U.S. based on income and race. The University of California Los Angeles Civil Rights Project finds that students in California are more segregated by race than ever before, especially Latinos. Elizabeth Lee reports for VOA from Los Angeles.
Video

Video Vietnamese Staging Chinese Product Boycott After Oil Rig Spat

China recently pulled an oil rig from an area of the disputed South China Sea that Vietnam also claims. Despite the action, the incident has had a lingering effect on consumers in Vietnam. VOA's Reasey Poch reports from Hanoi on an effort to boycott Chinese products.
Video

Video A Summer Camp for All the World

VIDEO: During workshops and social gatherings, the Global Youth Village summer camp encourages young people to cooperate and embrace their differences, while learning to communicate with people from other countries. VOA's Deborah Block has more.
Video

Video From Cantankerous Warlock to Incorruptible Priest, 'Harry Potter' Actor Embraces Diverse Roles

He’s perhaps best known as Mad Eye Moody, the whimsical wizard in the Harry Potter franchise. But character actor Brendan Gleeson's resume includes dozens of films, and he embraces all the characters he inhabits with equal passion. In an interview with VOA’s Penelope Poulou, Gleeson discussed his new drama "Calvary" and his secret to success.

AppleAndroid