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Only Spice Jet and Go Air to get FDI benefit

Chennai, Sep 16 () : According to aviation industry, Spice Jet and Go Air will benefit from the 49% FDI in airlines while for the rest, it is more of showpiece and not going to turn around any Indian airlines unless there is a structural change in the Government tax policy.

Indian aviation companies including the state-supported Air India has a combined loss of Rs 12000 crore. In the previous quarter, loss-making Jet Airways and Spicejet started posting profits but still they are in the red. Go Air, the low cost airline which is showing profits might attract the foreign investors.

The million dollar question in the aviation sector is that which foreign carriers are doing well so as to invest in Indian sector which is reeling under losses. The high-flying Kingfisher nearing bankruptcy and hit by frequent strikes hardly looks like a good investment opportunity. Those aircrafts that it leased have gone back to the lenders. Its international operations have ceased and market share has gone down.

The tax structure needs a drastic change and FDI will not bring about the change. India’s taxation is based on China’s tariff which is 180 % more. The world’s most expensive airport in terms of landing fees and handling charges is Delhi’s Indira Gandhi International terminal. Almost all the metros’ airport rates have risen by two hundred times and the recent to join this is Chennai’s newly renovated international airport. The high rates make cargo companies look for other destinations and naturally cargo volumes go down.

Next in line is the tax on aviation fuel which keeps going up. A no-frills airline in India pays per block per hour $4000 which no other airline in the same category pays anywhere in the world. Wilbur Ross, the US billionaire is to invest in Spicejet and Wadia owned GoAir too could get investors from abroad.

Even though Vijay Mallya sounded very happy with FDI in aviation, the bankers jokingly said that FDI cannot be enticed by Kingfisher calendar but only by the balance sheet that shows Rs 8000 crore loss.

Over the years policy makers have opened up domestic routes to foreign airlines and they point out that US which has a very liberal economic policy allows only 29% FDI and that too with many riders like no voting power in the director board etc.