FDI in aviation: Are we solving the problems?

The government of India has allowed FDI in aviation. Though, it has shown considerable haste in this decision,  a person with common understanding of our aviation sector would wonder where are the much needed tax reforms which could have been a better medicine for our ailing aviation sector. Is our government expecting too much? Is it not like turning a blind eye to our inefficiencies? Does it not reflect poorly on our managerial capabilities to make this sector a progressive and growth-oriented one? Will the customers continue to get the cheapest air fare in the wake of FDI infusion? Will the foreign airliners be able to offer cheap international air tickets and remain profitable at the same time, especially when the fuel costs are rising and the government has studiously avoided the tax reduction topics?

What would the foreign investor look for? First and foremost, every investor would like to see the future of aviation in India, beyond its current problems, and how will the government policies nurture a more airline-friendly atmosphere. Since they would be investing with a long-term perspective, we need to offer them a road-map into the future. And, there will be a need for firm commitments from the government before they infuse money to rid our debts.

Secondly, the foreign investor would like to have a very close look at the market scenario and how is it likely to change in future? Which current carrier is best suited to take advantage of the emerging conditions in future would be analysed? These carriers would additionally be checked for their past record of aviation, revenue generation and profitability, market capitalisation, aircraft fleet maintained by them and a number of other factors.

Finally, the investors would also be looking at the root causes of the problems and whether these can be solved by the infusion of FDI. The management-pilots and management-crew relations will come under closer scrutiny as will be the labour laws. No investor might like to put money in an airline which has a track record of persistent management-labour problems which affects the flights operations. So, besides looking at the causes, it will also examine the feasibility of improving these relations and of developing a more conducive business environment.

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