Foreign airlines can own up to 49% stake in Air India

The government today allowed foreign airlines to own up to 49 per cent stake in national carrier Air India at a time when the process for strategic disinvestment of the debt-laden airline is on.

The move would pave the way for Indian players such as Tatas to join hands with foreign entities in bidding for Air India.While allowing foreign investors, including overseas airlines, to have stake in Air India, the government has also made it clear that the national carrier's substantial ownership and effective control would remain with an Indian national.

A group of ministers is in the process of finalising the contours for the proposed strategic stake sale in the national carrier and expression of interest is likely to be invited from bidders soon.The Cabinet, chaired by Prime Minister Narendra Modi, today gave its approval to a number of amendments in the FDI policy, including those pertaining to Air India.

Now, foreign airlines have been allowed to have up to 49 per cent stake under the approval route in Air India subject to certain conditions, an official release said.Foreign airlines were allowed to invest under government approval route in the capital of Indian companies operating scheduled and non-scheduled air transport services, up to the limit of 49 per cent of their paid-up capital.The provision was not applicable to Air India.

"It has now been decided to do away with this restriction and allow foreign airlines to invest up to 49 per cent under approval route in Air India...," the release said.Foreign investments in Air India, including that of overseas airlines, should not exceed 49 per cent either directly or indirectly."Substantial ownership and effective control of Air India shall continue to be vested in Indian national," the release said.

While there have been reports suggesting that Tatas and Singapore Airlines might jointly bid for Air India, there has been no official word from the government or the carriers concerned.Singapore Airlines today said it will keep options open on Air India disinvestment.Surviving on taxpayers' money, Air India is estimated to have a debt burden of more than Rs 50,000 crore. Various efforts are being made to improve the financial performance of the national airline, including by way of sale of non-core assets.

Under a turnaround plan approved by the previous UPA regime, Air India is to receive up to Rs 30,231 crore from the government subject to meeting certain performance thresholds.The ten-year bailout package began from 2012.The International Air Transport Association (IATA), a global grouping of airlines that includes Air India, said the amendment in the FDI policy is a step in the right direction.

"Now Air India is on par with other Indian airline operators with respect to FDI norms. This was much needed in light of the proposed privatisation of Air India and should hopefully bolster the prospects of Air India's privatisation," Jatin Aneja, Partner and National Practice Head (Project and Project Finance) at law firm Shardul Amarchand Mangaldas and Co said.