Foreign carriers ordered to divest in India

Foreign carriers ordered to divest in India

NEW DELHI (AFP): India yesterday ordered foreign airlines to
withdraw their investments from Indian domestic carriers within
six months.

Aviation Minister C.M. Ibrahim said: "Existing companies
operating in the domestic air transport sector, in which equity
is held by foreign airlines directly or indirectly, will have to
disinvest within six months time."

The six-month deadline follows the approval of a new aviation
policy unveiled by the Indian cabinet earlier this week.

The policy rules that foreign airlines will not be allowed to
invest in domestic Indian airlines, although overseas investors
outside the aviation sector can hold up to 40 percent stakes in
domestic airlines.

The new guidelines effectively killed off a 708-million-dollar
plan by Singapore Airlines (SIA) and an Indian company, the Tata
business group, to set up a new airline in India.

The project was first proposed at the start of 1995.

Ibrahim's statement Friday also spelt trouble for another
domestic airline, Jet Air. Around 40 percent of the company's
equity, held by two Gulf-based airlines, will now have to be sold
off.

Ibrahim has argued that investment by foreign airlines in
private companies would lead to the destruction of India
Airlines, the state-run domestic carrier, which is plagued by
chronic labor unrest and financial losses.

However, the minister said 100 percent foreign equity will be
welcomed into the domestic airports.

"The government has forwarded a proposal to this effect to the
cabinet," Ibrahim said.

To eliminate "non-serious" firms from entering the aviation
sector, the minimum fleet size for a "scheduled operator" has
been raised from three to five, a move which would hit some seven
private carriers here, analysts said.

Ibrahim said all domestic airline companies will have to
deploy 10 percent of their capacity in the economically-backward
areas of the country such as Northeast, Jammu and Kashmir and
Andaman and Nicobar Islands.

He also claimed that Indian Airlines was expected to make a
profit of around US$26 million in the year to March 1998 after
years of financial losses.

Around 20 private airlines were launched in India in direct
competition with the national carrier, Indian Airlines, after the
government opened up the industry to the private sector in 1992.