Govt allows foreign airlines to invest in Air India; aviation stocks climb, Spicejet falls 2%

The government has allowed foreign airlines investment in Air India by up to 49%.

Water canons welcome the first Air India direct flight from Bangkok as it arrives at Biju Patnaik International Airport in Bhubanewsar. Image Source: IANS

Shares of the listed Indian aviation companies, with the exception of Spicejet, soared post the announcement of the government allowing foreign airlines investment in Air India.

Foreign airlines have now been allowed to invest up to 49% under approval route in Air India, the Cabinet said on Wednesday.

The restriction on foreign airlines investing in the national carrier has now been removed as Air India moves towards disinvestment.

“As per the extant policy, foreign airlines are allowed to invest under government approval route in the capital of Indian companies operating scheduled and non-scheduled air transport services, up to the limit of 49% of their paid-up capital. However, this provision was presently not applicable to Air India, thereby implying that foreign airlines could not invest in Air India,” the Cabinet said.

It has now been decided to do away with this restriction and allow foreign airlines to invest up to 49% under approval route in Air India subject to the conditions that:

1. Foreign investment(s) in Air India including that of foreign Airline(s) shall not exceed 49% either directly or indirectly

2. Substantial ownership and effective control of Air India shall continue to be vested in Indian National.

Stock price of InterGlobe Aviation edged up on BSE Sensex post the announcement. IndiGo the subsidiary of InterGlobe Enterprises based out of Gurgaon was the only listed airline by Ministry of Civil Aviation that formally expressed interest in Air India and Air India Express.

Shares of IndiGo were trading up 1.39% post the announcement on the BSE Sensex. At 1323 hours IndiGo’s shares were trading 1.03% or 12.60 points up at Rs 1239.60 per share.

Even Jet Airways shares climbed nearly 2% post the announcement. At 1336 hours, shares of the company were up 0.69% or 5.80 points at Rs 843 per share on the BSE Sensex.

However, shares of Ajay Singh backed Spicejet fell over 2%. At 1338 hours, Spicejet shares were down 2.43% or 3.35 points at Rs 134.35 per share.

Vistara CEO, Leslie Thng had also reiterated that Singapore Airlines was also open to bidding for Air India. “I think Singapore Airlines has an open mind. It really depends eventually on whether there is a business case. I don’t think we know enough at this moment,” he said.