Govt eases norms for foreign investment in regional airlines

New Delhi: In a significant move to boost regional air connectivity, the government on Tuesday relaxed norms allowing up to 49 percent foreign direct investment through the automatic route in regional carriers.

Currently, foreign entities can own up to 49 percent stake in domestic airlines, including regional ones, but need prior government approval.

Now, regional carriers are allowed to offload up to 49 percent stake to overseas entities without seeking Foreign Investment Promotion Board (FIPB) nod.

There are at least three regional airlines -- Air Costa, Air Pegasus and True Jet -- operating on various routes and which between them have more than 460 flights every week.

Unveiling the relaxations in FDI norms for as many as 15 sectors, the government in a release on Tuesday said, "Regional air transport service (RSOP) will also be eligible for foreign investment up to 49 percent under the automatic route."

Currently, FDI up to 49 percent is allowed in scheduled air transport service/domestic scheduled passenger airline.

At least two of the three regional airlines are exploring opportunities to collaborate with foreign players, including a possible stake sale.

Meanwhile, foreign equity caps in non-scheduled air transport and ground-handling services have been increased to 100 percent from 74 percent, the government added.

The easing of FDI norms also comes at a time when the government has proposed various measures to bolster regional air connectivity in the revised draft civil aviation policy.

Aviation think-tank CAPA's India CEO Kapil Kaul said allowing 49 percent FDI through automatic route in regional carriers would facilitate easier entry for overseas players even though no significant impact is expected.

"Overall, the move should have a positive impact and send a positive signal about the government's intent, especially when the draft policy has already some significant measures incorporated," Kaul said in a statement.

Significant revival of investment interest in aviation sector is expected, subject to implementation and execution, he added.

On allowing 100 percent FDI in general aviation, the Centre for Asia Pacific Aviation (CAPA) said it's "a welcome and game changing move", especially for the helicopter segment.

"With the draft civil aviation policy providing a structural lift to helicopter operations in India, 100 percent FDI will bring in capital and expertise and shift dynamics completely," Kaul said.

He added that allowing 100 percent FDI in ground-handling services will allow existing and new entities to plan more aggressive expansion and investment.