Kingfisher Airlines stock saw an unexpected upward movement today following a strong buzz in the market that the Government might finally give in to the domestic airline industry's demand to open up the sector to foreign airlines.

The airline's stock rose nearly 7 per cent to close at Rs 23.30 on indications that the Government might allow foreign airlines to own up to 25 per cent stake in private airlines in the country which would rescue the beleaguered industry. Jet Airways' stock too rose 1.76 per cent to close at Rs 239.95.

Both Kingfisher Airlines as well as Jet would be the biggest beneficiaries of this move as their total debt burden is over Rs 20,000 crore. “The industry is facing big issues, and there is a good chance that 25 per cent FDI might be approved,” an analyst with a brokerage firm told Business Line .

Sources close to Kingfisher Airlines also said that both the Tatas and Reliance Industries might be interested in the airline. The two big corporate giants have been nursing a desire to float an airline for several years now. The advantages that Kingfisher Airlines has are the licence to fly on international routes and a strong fleet.

But, another aviation analyst pointed out that given that Kingfisher Airlines' assets are collateralised, and the basic balance sheet is between zero and negative, these companies are not likely to go for the buy.

“With banks holding equity at over Rs 60, even they won't be satisfied with the deal. And with over Rs 1,000 crore as premium, I don't think any company will be willing to pay that kind of premium,” the analyst said.

A 13-bank consortium holds a 23 per cent stake in the airline and was given shares at a price of about Rs 60 each.

It makes more sense for a foreign airline to pick up stake which would help them to gain a foothold, the analyst said.

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