WHY IS FDI MUST IN

AVIATION SECTOR IN INDIA

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INTRODUCTION
After the liberalization on foreign investment rules in the aviation sector of India, the number of
national and international players and investors, and number of aircrafts (passenger, cargo, charter,
etc.), both
earning are to be increased further, in forthcomingKeywords
objectives years.

The Indian aviation industry has recovered fully from the covid-19 pandemic shock as indicated by
the air traffic movement which stood at 613,566 in the first quarter of FY 2022-23 compared to
300,405 in the same period last year.

Indigo is the largest airline company in India with the highest market share

India has become the third largest domestic aviation market in the
world
INDUSTRY OVERVIEW
INDUSTRY OVERVIEW
INDUSTRY OVERVIEW

UDAN (Ude Desh ka Aam Naagrik )

It is a regional airport development program of the Government of India and part of the Regional Connectivity
Scheme (RCS) of upgrading under-serviced air routes. Its goal is to make air travel affordable and improve
economic development in India.
100% FDI FOR GREENFIELD PROJECTS
As per the present FDI policy, foreign investment up to 49% is allowed under automatic route in
Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline and regional Air Transport
Service.

OPEN SKY POLICY

It implies that nations within 5,000 kilometers of distance need to enter into a bilateral agreement and
mutually determine the number of flights that their airlines can operate between the two countries . India
has open sky agreements with Greece, Jamaica, Guyana, Finland, the USA, Japan, etc.
REQUIREMENT OF FDI
IN AVIATION
The adoption of modern, advanced technology and methods would extend to the local
economy, resulting in improved industry productivity and efficiency.

FDI helps in setting-up new airports, and improving the infrastructure and services of
existing airports.

Foreign Firm's Helps in Increasing the Competition : Foreign firms have dependably
thought of better technology, process and developments contrasting and the local firms.

Builds synergies
ADVANTAGES
MERGER OF AIR INDIA AND VISTARA
Singapore Airlines (SIA) and Tata Sons announced the merger of Air India and Vistara, which is
expected to be completed by March 2024.

Vistara is a joint venture between Tata Sons and SIA. The airline was established in 2013 and is India's
leading full-service carrier with international operations in the Middle East, Asia, and Europe.

SIA holds a 49 per cent stake in Vistara, while the rest 51 per cent is with Tata.

Tata Group acquired Air India from the government in January this year. Ever since the acquisition,
there had been talks of a merger between Air India and Vistara
INVESTMENT

• Air India and Vistara, with SIA also investing INR 20,585 million (S$360 million,
US$250 million) in Air India as part of the transaction.

• This would give SIA a 25.1% stake in an enlarged Air India group with a significant
presence in all key market segments

• SIA with its internal cash resources stood at S$17.5 billion as of 30 September 2022.

• SIA’s 25.1% stake post-completion, its share of any additional capital injection could be
up to INR 50,200 million was payable only after the completion of the merger.
IT’S A WIN WIN DEAL

• The combination of Air India and Vistara will bring

significant synergies as the former has valuable slots
and air traffic rights while the latter has operational
capabilities and a customer base.

• Air India will be the only Indian airline group to

operate both full-service and low-cost passenger
services.

• An opportunity to deepen our relationship with Tata

and participate directly in an exciting new growth
phase in India’s aviation market.
The Need for FDI in Civil Aviation
Allowing foreign investment in the aviation sector will help Indian airlines that desperately need capital.

Private airlines in the nation and their operations and service upgrades necessitate consideration of
funding alternatives that are accessible to them.

Many domestic airlines may go out of business if they are denied access to foreign funding. This would
pose a systemic risk to financial institutions and leave a critical gap in the nation’s aviation infrastructure.
FDI by international airlines in local airlines is good, regardless of their capacity to revive the aviation
industry. Capital is needed by Indian airlines to expand. Even if foreign airlines are barred from
participating in Indian airlines under worldwide practice, the 49 percent foreign investment restriction
is a first in India.
Looking at the poor state of the civil aviation sector in India, the government introduced FDI in civil
aviation. Investing in Indian firms that provide scheduled and non-scheduled air transportation services
is permitted up to a maximum of 49 percent of their paid-up capital, subject to the fulfilment of specific
restrictions.
The criteria include the need for inflows to be made through the government-approved mechanism. The
49 percent cap will cover FDI in civil aviation, FII/FPI investment and other kinds of investment.