NEW DELHI/SINGAPORE India could ease restrictions that prevent some of its domestic airlines from flying on international services within a month, potentially benefiting start-ups set up by Singapore Airlines (SIAL.SI) and Malaysia's AirAsia (AIRA.KL) that aim to begin operations in 2014.
New Delhi is also considering a proposal to allow Airbus's (AIR.PA) A380 planes to land at local airports, aviation minister Ajit Singh said on Tuesday.
India's ban on A380s is mainly due to concerns that foreign carriers may further hurt state-run Air India by grabbing a larger share of international traffic.
Under existing rules, Indian carriers are also required to be in operation for at least five years and have 20 aircraft to be eligible to fly international routes.
Singh told reporters that New Delhi would seek the cabinet's approval by next month to "scrap this rule".
"At a macro level, this restores credibility to the Indian aviation sector," said Amber Dubey, an aviation expert at consultancy KPMG, of the Indian government's plans.
"It shows that the policy direction is always towards greater competition, the respect for logic, and being more aligned to global best practices," he said.
Conglomerate Tata Sons has formed a joint venture with SIA to start up a full service carrier, which is expected to begin operations in the second half of 2014.
Tata is also an investor in AirAsia India, which is expected to compete in the low-cost market from the second half of the year. Low-cost carrier GoAir, which began operations in 2005 but has fewer than 20 aircraft, could also be a beneficiary.
India's overall air passenger traffic is expected to triple from 2010-20 to 452 million annually, as rising income levels help more people fly in the country of 1.25 billion.
BIG PLANS FOR BIG PLANES
Dubey said opening up the market to A380s could push down international fares as one aircraft can accommodate more passengers, keeping costs lower.
He said major airports in New Delhi and Mumbai were already in position to receive the super-jumbos, but smaller airports would need to be assessed to see if they can handle the planes.
"We have asked for comments from ground handling and immigration, security basically. Because this is the infrastructure which will be affected because one plane will have up to 500-600 passengers at a time. So we are awaiting their comments," said civil aviation minister Singh.
A change could benefit carriers like Singapore Airlines, Emirates, Lufthansa and British Airways that operate the super-jumbo and fly to India, as well A380 customers like Etihad and Qatar Airways who have not taken delivery of the aircraft.
Kingfisher Airlines (KING.NS) was the only Indian A380 customer, but Airbus said on Monday that it had revoked that order. The Indian carrier, which had ordered five A380s, stopped operations in October 2012 after several years of losses.
(Editing by Prateek Chatterjee and Jeremy Laurence)