Airlines must decide what’s best for them

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: It is puzzling that organisations with the most experience in their domain, ie, foreign airlines, are specifically the ones that have been excluded from investing in Indian airlines, whereas anybody or any organisation without any relationship with the industry, except in their personal capacity, may do so. No clarification for this policy of creating barriers to prevent foreign airlines from participating in the financing of an Indian carrier has been given. A possible reason could be to protect state-owned Air India from the benefits that may accrue to private carriers from the injection of foreign capital and managerial expertise.

The argument that some airlines could unduly benefit by getting foreign managerial expertise in this manner carries little weight. On the whole, the managers of Indian carriers have shown that they are able to acquit themselves very well on issues of competitiveness and managerial skills. In fact, some Indian carriers have foreign CEOs and foreign senior personnel, not to mention flying crew, and there is no bar on them. There are some specific areas where such expertise maybe useful, eg, in yield management in a very competitive field, or fuel management, or building up safety management systems, or expanding networks with tie-ups with foreign airlines, to name a few specialised areas. Improving these areas will help both carriers and passengers.

That Indian carriers may be swamped by funds and bullied into accepting FDI is an invalid fear. The Indian financial market and finance managers of Indian carriers will only look for such funds as they judge to be beneficial to their business. Nor are international carriers likely to make funds available unless they see clear benefits. The managerial abilities of Indian managers can be counted upon to make good decisions in these aspects of the industry.

Another fear could be that monies obtained through illegal means may be used to fund some carriers. Considering the variety of sources for funds, it is difficult to imagine that the source of each and every fund being provided from abroad can be adequately monitored to meet policy provisions. Without the capability to quickly assess or trace a fund to its ultimate source, the practical implementation of the stipulation that prevents an Indian carrier from accepting investment from a foreign airline, directly or indirectly, is very difficult if not impossible. Similarly, it is difficult for the money from any other ‘permissible source’ to be tracked to its origin.