Beg, borrow, fly

The Government is feeling generous with our money: it is thinking of throwing away close to Rs 23,000 crore at Air India, mercifully over the next ten years. But, more sensibly, it is also examining a proposal to allow foreign airlines to acquire a stake in cash-strapped domestic carriers, most of which are losing money.

For those who are not aware, India has this extraordinary policy of allowing FDI in India's domestic airlines but everyone and his dog can invest, except foreign airlines. It is a bit like saying anyone can play for India's cricket team except cricketers.

There was a time when foreign airlines were allowed to invest in airlines in India. So Kuwait Airways and Gulf Air had a stake in Jet Airways. But because of some strong lobbying, the policy was changed. The stake held by the foreign airlines was then bought by Jet.

Today, those who lobbied against foreign airlines holding equity in Indian carriers want the law to be reversed.

Red cows

India's three full service airlines — Air India, Jet Airways and Kingfisher — are all reeling under losses. Kingfisher's losses increased by over 40 per cent to touch Rs 263.54 crore during the first quarter of this fiscal, compared with losses of Rs 187.35 crore recorded during the corresponding quarter of last fiscal. Similarly, Jet Airways has also been in the red.

Getting a foreign airline in as a partner, albeit a junior one, could also provide benefits other than cash. The international airline could help its Indian partner cut costs and bring about greater efficiency in its operations. It could also provide the domestic airline access to its international partner's global network, bringing in more passengers, all of which would translate into a healthier balance sheet.

Late, as usual

In many ways, changing the policy could see India follow the path that several other countries have taken in the past. For example, in April last year, British Airways and Iberia signed an agreement to merge, making their combined operations the third largest in the world by revenue. The newly merged entity is known as the International Airlines Group.

Similarly, in 2005, German carrier Lufthansa bought Swiss, Switzerland's national airline. The buyout came a year after Air France had taken over KLM Royal Dutch Airlines.

Even governments have done their bit internationally to help their aviation sectors remain in business. Since 2001, global airline operators have been given more than $5 billion by various governments by way of bail-out assistance. This quantum of funds will go up several-fold if one includes the multi-billion dollar bail-out package that the US Congress has approved for the American airline industry.

In the Asian region, since 2001, the Chinese Government has pumped in $1.605 billion into three airlines — $1.02 billion in China Eastern, $439 million in China Southern and $146 million in Shanghai Airlines.

The Japanese Government too has helped its national carrier, Japan Airlines, by providing over $2 billion. And in Europe, the Italian Government has provided close to $1.4 billion to ailing Alitalia.

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