Kingfisher, BA Deal Rumored

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By Neelam Mathews

As the debate over foreign direct investment in Indian airlines heats up, cash-strapped Kingfisher Airlines may be in talks with British Airways for an investment, The DAILY has learned. A 49% equity would give BA a board seat, while control would remain with the Indian carrier.

BA refused to comment, and a Kingfisher spokesman said, “We’ve not offered any comment on this subject recently to any media house.”

India’s present policy allows investment of up to 49% in Indian airlines but not by foreign carriers.

The signs may be there that the situation is changing because starting June 1, Kingfisher began participating in oneworld’s Global Explorer round-the-world fare, available to airlines that, like British Airways, are members of the alliance. Non-member airlines of the Explorer program include Aer Lingus, Air Pacific, Alaska Airlines, Horizon Airlines and Gulf Air.

Given that Kingfisher has barely any long-haul international flights except for two dailies to London from Bangalore and Mumbai, a sector that is bleeding due to overcapacity, it is likely that if the carrier joins oneworld, it will offer its domestic connections to oneworld members.

The addition of Kingfisher’s domestic network will offer about 65 connections across the country.

“British Airways will clearly have access to a large domestic market,” says one analyst.

There is however, opposition in the cadres. While all economic ministries have no issues with allowing foreign airlines to invest in India, the ministry of civil aviation is opposed to it following opposition from major carriers. Even Jet Airways, which recently said to have been in talks with Lufthansa and now has its finances in order, is not in favor of FDI by foreign carriers, says an airline official.

“As long as the opposition from the major airlines continues, we will not have a favorable FDI regime in the Indian airlines,” says Sydney-based think tank Center for Asia Pacific Aviation India chief Kapil Kaul.

“We need to make an urgent correction in the FDI regime and not distinguish between foreign airline capital and foreign institutional capital. We should treat both as FDI, as India is the only country which has this difference in treatment of FDI,” adds Kaul.

Others, such as Singapore Airlines, remain interested in potential opportunities related to the consolidation of the industry. “As we have said consistently, we remain interested in future opportunities in China and India, both of which are important markets to us. We have friendly discussions with other airlines on a regular basis, but there are no talks at present on specific investment,” said spokesman Nick Ionides.

As Kingfisher looks for more funds and Air India seeks a government bailout, both private-sector airlines may need a cash cover, explained Kaul.

“We need to take a fresh look at our bilateral regime...Excess bilaterals will be against the interest of Indian carriers. As it is, foreign airlines are building large networks, and this makes competition with them difficult...[The] Indian government strangely has no issues with granting unlimited bilateral access to foreign airlines but opposes the investment from these airlines. This logic is difficult to understand,” said Kaul.

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