The news that the government will shortly consider a proposal to allow foreign airlines to pick up nearly 49% equity stake in Indian carriers will certainly improve the mood in India?s aviation sector. First, this will help the sector that is projected to post losses of Rs 10,000 crore in FY10 to find ways to gradually transform its loss-making entities into profitable ventures. Second, this will help to fund fleet acquisition plans of various airlines.

The presence of foreign carriers?in the event of their picking up stakes in Indian peers? will also bring to the Indian skies the concept of feeder routes. For instance, if British Airways or the Germany-based Lufthansa pick up stakes in any of our full-service carriers or low-cost airlines, the passengers will enjoy an enhanced experience, travelling seamlessly across the length and breadth of the globe. Since the entire route will be controlled by one airline.

Jet Airways has been thinking about starting cargo services and even entertaining grand plans of opening training academies of global standards?all of these can come true with financial assistance from international counterpart interested in picking up a stake in the carrier. Anyway, in media interactions, Jet chairman Naresh Goyal has repeatedly mentioned plans for offloading a 5% stake to help raise capital.

In recent times, we have seen only one global private equity player execute interest in the sector?Wilbur Ross invested Rs 345 crore in SpiceJet in July 2008. As for carriers like GoAir that have been looking for strategic partners to offload 26% stake, their plans haven?t seen the light of the day due to restrictions on foreign carriers being allowed to invest in Indian carriers.

On the flip side, even if Air India wanted a foreign carrier to run it partially, there would be a strong opposition from more than a dozen of its unions. Hence, the airlines will not take the risk of proclaiming the fact that it?s open to restructuring. However, it might seek subtle ways of dealing with the unions, to coax them into accepting the reality.

shaheen.mansuri@expressindia.com