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

Changing Under Pressure, IS ‘Potent’ as Ever

US intel officials describe Ramadi's fall as concerning, but say it isn't emblematic of larger effort to degrade IS capabilities More

Nigeria Fuel Shortage Shows Fragility of Africa’s Oil Giant

Although it is the largest oil producer in Africa, country has nearly ran out of fuel it needs to power its generators, cars and airplanes over the past week More

Arrested Football Officials Come Mainly From the Americas

US Justice Department alleges defendants participated in 24-year scheme to enrich themselves through corruption of international soccer 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.
3D Printer Makes Replica of Iconic Sports Cari
|| 0:00:00
...    
🔇
X
George Putic
May 27, 2015 9:31 PM
Cars with parts made by 3D printers are already on the road, but engineers are still learning about this new technology. While testing the possibility of printing an entire car, researchers at the U.S. Department of Energy recently created an electric-powered replica of an iconic sports roadster. VOA’s George Putic has more.
Video

Video 3D Printer Makes Replica of Iconic Sports Car

Cars with parts made by 3D printers are already on the road, but engineers are still learning about this new technology. While testing the possibility of printing an entire car, researchers at the U.S. Department of Energy recently created an electric-powered replica of an iconic sports roadster. VOA’s George Putic has more.
Video

Video US Voters Seek Answers From Presidential Candidates on IS Gains

The growth of the Islamic State militant group in Iraq and Syria comes as the 2016 U.S. presidential campaign kicks off in the Midwest state of Iowa.   As VOA’s Kane Farabaugh reports, voters want to know how the candidates would handle recent militant gains in the Middle East.
Video

Video A Small Oasis on Kabul's Outskirts Provides Relief From Security Tensions

When people in Kabul want to get away from the city and relax, many choose Qargha Lake, a small resort on the outskirts of Kabul. Ayesha Tanzeem visited and talked with people about the precious oasis.
Video

Video Film Festival Looks at Indigenous Peoples, Culture Conflict

A recent Los Angeles film festival highlighted the plight of people caught between two cultures. Mike O'Sullivan has more on the the Garifuna International Film Festival, a Los Angeles forum created by a woman from Central America who wants the world to know more about her culture.
Video

Video Kenyans Lament Losing Sons to al-Shabab

There is agony, fear and lost hope in the Kenyan town of Isiolo, a key target of a new al-Shabab recruitment drive. VOA's Mohammed Yusuf visits Isiolo to speak with families and at least one man who says he was a recruiter.
Video

Video Scientists Say Plankton More Important Than Previously Thought

Tiny ocean creatures called plankton are mostly thought of as food for whales and other large marine animals, but a four-year global study discovered, among other things, that plankton are a major source of oxygen on our planet. VOA’s George Putic reports.
Video

Video US-led Coalition Gives Some Weapons to Iraqi Troops

In a video released Tuesday from the Iraqi Ministry of Defense, Iraqi forces and U.S.-led coalition troops survey a cache of weapons supplied to help Iraq liberate Mosul from Islamic State group. According to a statement provided with the video, the ministry and the U.S.-led coaltion troops have started ''supplying the 16th army division with medium and light weapons in preparation to liberate Mosul and nearby areas from Da'esh (Arabic acronym for Islamic State group).''
Video

Video Amnesty International: 'Overwhelming Evidence' of War Crimes in Ukraine

Human rights group Amnesty International says there is overwhelming evidence of ongoing war crimes in Ukraine, despite a tentative cease-fire with pro-Russian rebels. Researchers interviewed more than 30 prisoners from both sides of the conflict and all but one said they were tortured. Henry Ridgwell reports for VOA from London.
Video

Video Washington Parade Honors Those Killed Serving in US Military

Every year, on the last Monday in the month of May, millions of Americans honor the memories of those killed while serving in the armed forces. Memorial Day is a tradition that dates back to the 19th Century. While many people celebrate the federal holiday with a barbecue and a day off from work, for those who’ve served in the military, it’s a special day to remember those who made the ultimate sacrifice. Arash Arabasadi reports for VOA from Washington.
Video

Video Kenya’s Capital Sees Rise in Shisha Parlors

In Kenya, the smoking of shisha, a type of flavored tobacco, is the latest craze. Patrons are flocking to shisha parlors to smoke and socialize. But the practice can be addictive and harmful, though many dabblers may not realize the dangers, according to a new review. Lenny Ruvaga has more on the story for VOA from Nairobi, Kenya.
Video

Video Rolling Thunder Run Reveals Changed Attitudes Towards Vietnam War

For many US war veterans, the Memorial Day holiday is an opportunity to look back at a divisive conflict in the nation’s history and to remember those who did not make it home.
Video

Video Female American Soldiers: Healing Through Filmmaking

According to the United States Defense Department, there are more than 200-thousand women serving in the U.S. Armed Forces.  Like their male counterparts, females have experiences that can be very traumatic.  VOA's Bernard Shusman tells us about a program that is helping some American women in the military heal through filmmaking.

VOA Blogs