Foreign airlines in talks to buy stakes in domestic carriers

Foreign airlines in talks to buy stakes in domestic carriers

Foreign airlines in talks to buy stakes in domestic carriers

Some Indian private airlines are in touch with foreign carriers for sale of stakes that could happen soon, a government official said Monday.

"A possible stake sale is on the card," said the official preferring anonymity and added that the talks are on with carriers based in the Middle East and Southeast Asia.
 “These are private affairs between the airlines and as much as we know that they are in talks and that some movement is expected in a month or two.”

Talk of possible stake sale has been doing the rounds for the last three months, ever since the government allowed foreign airlines to pick up 49 percent shares in domestic carriers. This sent the scrips of two of the most eligible private airlines for FDI -- Jet Airways and SpiceJet soaring.

On Monday the stocks of both Jet Airways and SpiceJet rallied in intraday trade, with Jet Airways shares climbing 13.57 percent at Rs.574.40 from its previous close of Rs.505.75.

SpiceJet's scrip was up 15.01 percent at Rs.45.20 from its previous close of Rs.39.30. Sharan Lillaney, aviation analyst at broking firm Angel Broking, told IANS that the foreign carriers are not short-time investors and that the long term growth story in India is very attractive for them. "No one will announce any plans until all the modalities are fulfilled."

"SpiceJet is a good buy for international airlines as the airline has very little debt and is in the fastest growing sector which is low cost. So valuation of SpiceJet is going to be very attractive," Lillaney said.

Earlier, the government on Sep 17, 2012 allowed foreign airlines to invest up to 49 percent in private domestic carriers.  The foreign carriers were so far not been allowed to directly invest in Indian carriers for security reasons, although 49 percent FDI by non-airline players was allowed.

The Indian civil aviation sector has been going through a tough operating environment as high fuel and interest costs have hurt it. The government expects that the decision will help bring in more funds to the airlines who have been cold shouldered by banks.