Even as the Indian government is keen to allow foreign passenger carriers own 26% stake in Indian carriers, many foreign airlines are shying away from an equity joint venture as they prefer to have controlling stake rather than be a passive investor.

Three of the four foreign airlines FE spoke to said they are averse to purchasing 26% stake in Indian carriers.

?Lufthansa currently has no plans whatsoever to take up equity stakes in any Indian airline,? said a Lufthansa spokesperson in an email response. ?We don?t have to.? The airline?s strategy to achieve a strong presence in India is working, he added. The German airline, which has been in India for the last 50 years, operates 77 weekly flights along with its subsidiaries, connecting seven Indian destinations to Europe.

Last week, Indian financial dailies, including FE, reported, quoting unnamed sources, that the Department of Industrial Policy and Promotion (DIPP) has proposed to allow foreign carriers to own up to 26% stake in Indian carriers.

?We are the national carrier for Singapore. We don?t wish to invest in an Indian airline unless we have a controlling stake in it. So for us, at this moment investing in Indian airlines does not make sense,? Singapore Airlines? general manager-India, GM Toh, said. Singapore Airlines, one of the most profitable among global carriers, was keen in 2001 to purchase a controlling stake in national carrier Air India. Singapore Airlines operates 82 weekly flights along with its subsidiary flights connecting 13 Indian destinations to Singapore and beyond.

?Foreign airlines? investment in domestic carriers should be allowed up to 49%, as is the case with foreign institutional investors or FIIs,? said Kapil Kaul, CEO Indian Subcontinent & Middle East at Centre for Asia Pacific Aviation (CAPA), a global aviation analysis, data and intelligence group. ?As regards the ownership, the government can ensure ownership stays in the hands of Indian nationals.?

Many airlines have enough room to sell 26% stake to foreign airlines. FIIs own 4.67% in Jet Airways, 6.17% in SpiceJet and 2.11% in Kingfisher Airlines.

Air Asia, Asia?s largest international low-cost carrier, is also not interested in investing in Indian carriers. ?The Indian market is not conducive for investment at all,? said the airline?s chief executive officer, Arzan Osman Rani told FE in a recent visit to India. ?The intense competition in the market does not make investing in Indian carriers an attractive proposition.?

Some carriers are keen to invest. International Airline Group (IAG), the holding company of British Airways and Iberia Airline, is keen to invest in Indian carriers.

?IAG is a strong advocate for liberalisation within aviation and would welcome any moves by the Indian government to allow foreign investment in Indian airlines,? an IAG spokesperson said in a email response. ?Our objective is to become a global airline group and we will review any investment opportunities as they arise.?

British Airways, the eighth largest global airline by passengers has built close ties with India?s premium airline Kingfisher Airline which is under a financial stress with heavy debt. The British airline sponsored Kingfisher Airlines? proposal to join ?Oneworld? alliance, a global network of airlines. Last year in September, Kingfisher figured in the list of potential airlines, the British airlines prefer to invest.

India is the market for the future and many international airlines would look forward to investing in India if the laws were changed,? British Airways? chief executive Willie Walsh had said in September 2010 during his visit to India.

Indian carriers are unable to raise capital to expand as the high aviation fuel cost and higher government tax have deterred investors from investing in airlines. The airlines lose roughly $2.5-3 billion a year. Kingfisher Airlines? plan to raise $300 million by selling shares to foreign investors is yet to take off and Jet Airways sold its land to Godrej Properties to raise money.

Kingfisher Airlines posted a loss of R263.54 crore in Q1 of the 2011-12 financial year, SpiceJet had a loss of R71.96 crore in the same period and Jet Airways had a loss of R123.16 crore. All three airlines fly internationally.