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Quick Take
Should foreign airlines be allowed to buy controlling stakes in domestic carriers?
09 Jan 2009
We asked... Atul Asthana, independent consultant; Amit Jain, director, Goldstone Imaging; Amitabh Khosla, country director, International Air Transport Association (IATA); Kapil Krishan, chief financial officer, India Infoline; Pari Natarajan, chief executive officer, Zinnov Consulting; Amrit Pandurangi, leader, transportation and infrastructure practice, PricewaterhouseCoopers; Richa Goyal Sikri, director, group business development, STIC Travel Group; Naresh Varshney, national head, mutual munds, Unicon Financial Intermediaries; Neelabh, orthopaedic doctor, Kalra Hospital
"Yes. Greater competition will be healthy for the industry. It will improve service standards."
Kapil Krishan, chief financial officer, India Infoline
“The industry (aviation) is sick. Commercial freedom is needed to bring it back to good health.”
Amitabh Khosla, country director, IATA
“There are security issues that the government needs to take into account while taking a decision."
Richa Goyal Sikri, director, group business development, STIC Travel
YES BECAUSE: Airlines is an international business by nature. The coming of foreign carriers whether through mergers or through new businesses will mean better valuations for Indian carriers and also better services for customers. Most domestic airline firms are in the red and their finances are in a mess. In the current scenario of global liquidity crisis and economic meltdown, finances are hard to come by. If a suitable source for finances is not provided to local carriers then there is every probability of them going bankrupt. Foreign airlines should be permitted to acquire majority stakes, as they perceive India as a high growth destination. The aviation industry is incurring huge losses and commercial freedom is one of the medications needed to bring it back to good health.
NO BECAUSE: Allowing foreign airlines to buy controlling stakes in domestic carriers can pose a threat to national security. Air travel and related national security issues should be kept in mind while taking any such step. The government's current position — foreign companies other than airlines are allowed to hold up to 49 per cent stake in local carriers — is appropriate. Local carriers — some of them have gone international also — have shown that there is no dearth of local expertise to create quality products and services to compete globally. If need be, the government should try and bail them out rather than have them owned by foreign carriers. The government should facilitate consolidation within the country and restrict strategic investment by international carries.
MAYBE BECAUSE: The aviation sector is going through a rough patch and the current slowdown has taken a toll on its profitability. Companies are desperately looking to rationalise cost and improve efficiency. Entry of international players may bring international management practices to Indian carriers. Although FDI norms for foreign carriers should be eased, their role on the boards and in the management should be limited. Larger presence of foreign airlines will expose local airlines to better customer services and specialised security measures. This will lead to increased safety in the skies and will also force domestic carriers to improve their services. Active entry of international airline majors will bring in further competition in the sector, which will benefit the customer in the long run.
(Businessworld Issue 13-19 Jan 2009) |
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