Global airlines wary of investing in India

JUST because foreign airlines may soon be allowed to invest in India's battered carriers doesn't mean they will.!

New Delhi's expected move to allow global airlines to own up to 49 per cent in Indian carriers has been welcomed by investors as a potential lifeline for an industry mired in US$20 billion of debt and on course to rack up US$3 billion in annual losses.!

But aviation industry experts say any celebration is premature.!

"There's absolutely no reason to be bullish on airlines," said a Mumbai-based analyst with a local brokerage.!

"Unless fuel and other dollar-denominated costs come down, nobody's going to invest in these companies, they're in such bad shape," he said, referring to a 16 per cent decline in the rupee in 2011, which has driven up costs for carriers.!

Five of the country's six main operators are loss-making.!

Taxes in India make jet fuel far more expensive than for global competitors. And changing ownership rules will do little to alter India's unappealing market dynamics or regulatory environment.!

"Every airline will be interested in India because it's such a big market. But the environment should be conducive to the proper business processes," Akbar Al Baker, Qatar Airways CEO, has said.!

India boasts the fastest growing passenger market in major economies, up 17 percent to almost 61 million people last year, and the potential is huge. With a comparable population, China's domestic air passenger market is five times the size of India's.Reuters