March 17, 2017 TnH Global

Air India opposes changes to ownership norms

Existing norms mandate 2/3rd of members of an airline’s board must comprise Indian nationals

State-owned Air India has opposed changes to guidelines of ownership and control that will make it easier for a foreign entity to fully own an airline in India. Private airlines have already opposed the proposed changes.

Two Air India executives that Business Standard spoke to confirmed the airline had conveyed its opposition to the proposed changes to the civil aviation and commerce ministries. The development could dampen the government’s zeal to relax norms in order to attract foreign direct investment.

Qatar Airways Chief Executive Officer Akbar Al Baker last week announced it would start an airline in India, the world’s fastest-growing aviation market, together with Qatar’s sovereign fund.

Existing norms mandate that two-thirds of members of an airline’s board must comprise Indian nationals, which the draft proposal intends to change. Air India Commercial Director Pankaj Srivastava in a meeting with Commerce Minister Nirmala Sitharaman said the changes would hamper the business prospects of the airline.

“The airline’s version was that in case of entry of a deep-pocket foreign airline, the impact would be harsher on Air India, which had steadily lost ground to private Indian carriers,” said a source who was privy to the discussions.

When contacted, Srivastava declined to comment on the issue. Air India Chairman Ashwani Lohani also refused to comment. “The impact of allowing a foreign airline in India will be similar for Air India and other private carriers. We will also face the same deep-pocket competitor backed by its government. Air India is still under a huge debt burden,” an Air India executive said.

The Federation of Indian Airlines (FIA) has opposed the changes, saying no country allows its airlines to be controlled by foreign entities. Unified opposition to the government proposals by Air India and private airlines is rare since Air India quit the federation.

During stakeholders’ consultations over amending the rule that required airlines to have five years of domestic operations and 20 aircraft to become eligible for foreign operations, Air India initially opposed the move. Rohit Nandan, the then Air India chairman, sent a note to the civil aviation ministry saying if the rule was relaxed, it would be the end of the road for Air India. But the airline changed its stance later and told the government that it was in support of the move if it “helped the national interest”.

“Air India is finding many issues that the FIA opposes also impacts Air India, for instance, high airport charges and arbitrary increase in jet fuel prices by oil companies,” an executive with a private airline said.

News Source: www.business-standard.com