Skies are protected all over the world

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: 40% to 49% in October 2004, along with 100% FDI clearance for airport development, was expected to usher in root & branch reforms in the aviation sector. The means and the ends, however, have been on the lines of wishful thinking.

Foreign investments have fallen short of moving beyond metros to Tier-II and III cities where airport development and infrastructure upgrade continues to be neglected in the face of insufficient capital. The importance of domestic civil aviation is not restricted to creating efficacies of transport, but also an instrument of wider connectivity and inclusive economic growth— something foreign investments in domestic airlines do not promise to deliver.

A further FDI allowance in domestic airlines would adversely impact the financial health and future of India’s homegrown carriers and the civil aviation sector as a whole. The key challenge for India’s civil aviation sector is not more airlines, but better infrastructure in order to expand in a sustainable manner and develop on par with world standards.

Globally, contrary to the trend of FDI in other sectors, the aviation industry is protected by several restrictions in terms of operations, ownership and control. Most countries have imposed a 49% ownership limit in the airline industry. This is true of Singapore, China and a host of other nations across Asia and Europe.

The US, one of the freest economies in the world and home to the largest air travelling population, is even more restrictive. Foreign ownership of domestic US airlines is capped at 25% and current legislation does not allow foreign ownership of voting stock in US airlines to go up from 25% to 49%. In fact, the US Congress and department of transportation have thwarted all attempts to allow greater foreign ownership of US carriers, that includes turning down Richard Branson’s initiative to create a foreign-owned, US-based, low-cost airline.