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 VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. More

Video Sudan School Becomes Target of Aerial Attacks

Dropout rate at an all-time high in South Kordofan state because many schools have been destroyed during 3-year civil war More

Tennessee Songbirds Fly Coop Long Before Tornadoes Arrive

Researchers say birds apparently alerted to danger by sounds at frequencies below range of human hearing 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.
US: Response to Sony Hack Will Be Proportionali
X
Aru Pande
December 19, 2014 1:45 AM
The White House says President Barack Obama considers the cyberattack on Sony Corp. a serious national security matter and that the U.S. will counter with an "appropriate response." VOA correspondent Aru Pande reports.
Video

Video US: Response to Sony Hack Will Be Proportional

The White House says President Barack Obama considers the cyberattack on Sony Corp. a serious national security matter and that the U.S. will counter with an "appropriate response." VOA correspondent Aru Pande reports.
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Putin Says Russian Economy Will Emerge Stronger

Russian President Vladimir Putin has said his country's sinking economy will not only recover but also become stronger, despite falling oil prices and Western sanctions over Ukraine. VOA's Daniel Schearf reports.
Video

Video Detained Turkish Journalists Follow Teachings of US-Based Preacher

The Turkish government’s jailing of critical journalists has sparked international condemnation and is being seen as an effort to undermine the followers of an ailing Turkish preacher based in the United States. VOA religion reporter Jerome Socolovsky has more.
Video

Video ‘Anti-Islamization’ Marches Increase Tensions In Germany

Anti-immigrant rallies in Germany have been building in recent weeks, peaking Monday night in the city of Dresden where tens of thousands of people turned out to demonstrate against what they call the ‘Islamization’ of the West. Germany has offered asylum to more Syrian refugees than any other country, and this appears to have set off the protests. Henry Ridgwell reports from London.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.
Video

Video Refugees Living in Kenya Long for Peace in the Home Countries

Kenya is host to numerous refugees seeking safe haven from conflict. Immigrants from Somalia face challenges in their new lives in Kenya. Ahead of International Migrants Day (December 18) Lenny Ruvaga has more for VOA News from the Kenyan capital.

All About America

AppleAndroid