Govt opens up Air India to foreign airlines, FDI up to 49%

The disinvestment process of debt-ridden Air India gained momentum on Wednesday, with the Union Cabinet approving changes in the FDI policy to allow foreign carriers to own 49% stake in the flag carrier under the approval route.

This would now allow foreign airlines to bid for the national carrier with an Indian partner, who will have majority stakes. The promoters will have to keep an Indian as its Chairman, and cannot shift its headquarters out of the country.

"Foreign investment(s) in Air India, including that of foreign airline(s) shall not exceed 49% either directly or indirectly. Substantial ownership and effective control of Air India shall continue to be vested in Indian national," an official statement said.

The decision was taken at a meeting of the Union Cabinet chaired by Prime Minister Narendra Modi during which, a clutch of decisions on FDI was cleared. The government said the latest amendments are "intended to liberalise and simplify the FDI policy, so as to provide ease of doing business in the country.

The existing policy had allowed foreign airlines to invest up to 49% under approval route,   but so far had kept Air India out of its ambit. "It has now been decided to do away with this restriction to allow foreign airlines to invest up to 49% under the approval route in Air India subject to conditions," the statement said.

The Union Cabinet on June 28, 2018, gave an "in-principle" go-ahead for the strategic disinvestment of Air India, which has a debt of over Rs 52,000 crore, and is surviving on a bailout package rolled out by the previous UPA government, after tasking a Group of Ministers to work out its modalities. Earlier in 2000, the then A B Vajpayee government had cleared the disinvestment of Air India, but it could not go through, following protests.

Low-cost carrier IndiGo and the Tata Group had earlier evinced interest in bidding for the national carrier. The GoM is yet to finalise the contours of the disinvestment process.

The government decision also comes against the backdrop of a Parliamentary Standing Committee deciding to ask the government to review its decision to privatise Air India and explore the possibility of "an alternative to disinvestment" programme.