Foreign players owning airlines in India can have security issues: FIA

India has a robust domestic market unlike its immediate neighbouring countries on the east and west, who have little or no traffic of their own.

Published: 25th May 2017 08:05 PM  |   Last Updated: 25th May 2017 08:05 PM   |  A+A-

An IndiGo Airlines aircraft. (File | Reuters)

By PTI

MUMBAI:  Continuing its opposition to the government allowing foreign players to own an airline in India, the Federation of Indian Airlines (FIA) has said the move could have serious "security" implications besides other issues.

In a letter to the government recently, the FIA also said that the decision to allow foreign carriers owning an airline in the country will create a very inequitable competitive environment for them.

The letter comes against the backdrop of Qatar Airways announcing its plans to set up an airline in India with the Gulf nation's sovereign wealth fund, and the government recently saying that it is looking at bringing the rules and regulations regarding ownership and control of an airline in conformity with the new FDI norms. "By India permitting 100 per cent FDI in scheduled airlines, the Indian government will have no visibility on where control lies. Such a move could also have serious repercussions on India’s national security," the FIA said in the letter.

The FIA has four private airlines --IndiGo, SpiceJet, Jet Airways and GoAir as its members. The four airlines together command around 75 per cent share of the total domestic air travel market. "Such foreign-owned and controlled Indian airlines will also gain unhindered access to defence airfields in India.

In this connection, it is also pertinent to note that countries, whose diplomatic relations with India are strained, may also use this window (of opportunity) to gain access to India," the federations said. Last June, India allowed foreign investors — barring overseas airlines — to own up to 100 per cent stake in local carriers by liberalizing FDI regulations. Currently, foreign airlines are allowed to invest only up to 49 per cent in Indian carriers. However, the revised norms provide room for overseas airlines to partner with a foreign non-airline player to set up a 100 per cent foreign-owned carrier in India.

At the same time, the existing rule still mandates that substantial ownership and effective control (SOEC) of an airline must vest with Indian nationals. The chairman and two-thirds of the board must comprise Indians. "It must be noted that permitting 100 per cent FDI in scheduled airlines and removing the SOEC requirement skews the creation of a level playing field.

Opening up a market created and nurtured by the existing Indian airlines to foreign airlines, who may have access to cheaper (or even zero) cost capital will only result in the erosion of Indian capital and entrepreneurship," the letter stated. India has a robust domestic market unlike its immediate neighbouring countries on the east and west, who have little or no traffic of their own.

Allowing this captive market to be moved to the 'hubs' of the investor airline would not only negatively impact India’s own airport hubs, their traffic and viability, but will also be to the detriment of India’s own indigenous aviation industry and would damage its Tourism and job creation potential, the FIA said.

"If India dilutes the SOEC provisions (as proposed), foreign airlines will be allowed access to bilaterals from their country to India and also bilateral from India to their country. This will create a very inequitable competitive environment for Indian carriers," it added.

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