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Qatar Airways to set up domestic airline in India

Qatar Airways plans to set up a domestic airline in India.

The Indian Government's willingness to permit a local carrier that is fully-owned by foreigners will be a new experiment among major aviation markets, presenting its own set of challenges to local players and security agencies.

Officials at the top civil aviation ministry have welcomed plans by Qatar Airways to tie-up with Qatar Investment Authority to set up an airline in India to serve the local market.

The move comes less than a year after Indian Prime Minister, Shri Narendra Modi liberalised foreign direct investment policy for aviation sector, permitting foreign investment up to 100 percent in Indian carriers, comprising maximum 49 percent stake for foreign airline and 51 percent by a foreign investor.

This is marked by a key shift in India’s Foreign Direct Investment (FDI) policy pertaining to airlines, which, like other countries, remained guarded against allowing foreign airlines controlling carriers for decades.

However, leading Indian airlines have been opposing the government’s policy permitting a local airline to be fully owned by foreigners, arguing that no other country allows similar dispensation. Even the world’s largest aviation market, the US, for instance, restricts foreign ownership in domestic carriers to 25 percent. Although domestic carriers oppose such a move from commercial standpoint, other countries do not allow airlines to be fully owned by foreigners, as they consider it as a security threat.

In fact, the Federation of Indian Airlines, comprising SpiceJet, Jet Airways, IndiGo and Go Air have pressed for changes in FDI policy, with the argument that by permitting 100 percent foreign ownership in domestic market, it does not add to capital investments due to the nature of the sector, as most planes are leased, and departure and landing slots are the assets.

Qatar Airways’ plans to begin a local airline, which will be positive for India, as it will expand the local market and bring in jobs and investments. Growing at more than 20 percent annually, India’s domestic market is now the third largest in he world, with more than 10 crore passengers in the previous year, which present a lucrative business opportunity for foreign carriers.

Apart from airlines, the government allows foreigners to own 100 percent equity in airports, non-scheduled air transport services, helicopter services and ground-handling services.

Non-Resident Indians are allowed to have 100 percent stake in a local carrier. Officials in the civil aviation ministry, together with the Department of Industrial Policy and Promotion, are close to finalizing the changes in these rules, which will make way for foreign ownership in local airlines.

Posted on 2/5/2017

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