Cabinet defers aviation FDI decision to next week

NEW DELHI Thu Apr 12, 2012 3:00pm IST

1 of 5. SpiceJet aircrafts prepare for landing and take-off at the airport in Mumbai July 15, 2008.

Credit: Reuters/Punit Paranjpe/Files

Stocks

   

NEW DELHI (Reuters) - The cabinet deferred on Thursday a much-awaited decision to let foreign airlines buy stake in local carriers and may take up the issue next week, Civil Aviation Minister Ajit Singh said, disappointing investors and sending share prices of carriers down.

Under current rules, foreign airlines are barred from buying stakes in domestic carriers, although foreign investors are allowed to hold a cumulative 49 percent.

Indian airlines, led by embattled Kingfisher Airlines (KING.NS), have long lobbied for the move. However, a brutal Indian market where five of the six big players lose money, as well as tough conditions globally due to high fuel prices and economic weakness, means interest is expected to be muted.

Indian carriers are laden with $20 billion in debt and probably lost $2.5 billion in the fiscal year that ended in March, according to Centre for Asia Pacific Aviation, a consultancy.

National carrier Air India accounts for the bulk of the industry's losses.

India's cabinet Wednesday approved a financial restructuring plan for Air India, which includes equity infusion by the government and restructuring of $4 billion in debt.

India's reputation among global investors has taken a knock over the past year as the government has been beset by crises, including a botched attempt to allow foreign supermarkets into the country and a long-running stand-off with South Korea's POSCO (005490.KS) over a $12 billion steel plant.

Shares in carriers reversed their early gains after the news. Kingfisher and Jet Airways (JET.NS) fell by 4 percent, while SpiceJet (SPJT.BO) dropped 5 percent.

(Reporting by Nigam Prusty, writing by Anurag Kotoky; Editing by Subhadip Sircar)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

India-WTO Row

REUTERS SHOWCASE

Market Eye

Market Eye

Nifty falls most in nearly 3-1/2 weeks; Sensex down over 400 points  Full Article 

Factory Activity

Factory Activity

Factories post fastest growth for 17 months in July  Full Article 

Reviving Infosys

Reviving Infosys

CEO Sikka says to improve business with new growth avenues  Full Article 

Outlook Slashed

Outlook Slashed

ArcelorMittal cuts outlook as ore prices hit mining  Full Article 

Re-gaining Momentum

Re-gaining Momentum

China, Asian factory growth gathers pace; Europe falters  Full Article 

Car Launch Ahead

Car Launch Ahead

Tata Motors bets on new sedan to revive weak India sales.  Full Article 

Gold Smuggling

Gold Smuggling

In cat-and-mouse game, India uncovers new gold smuggling route.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage