Thursday, April 17, 2014
A recent story from the Economic Times highlights the difficulties States encounter as they try to relax restrictions on foreign ownership of airlines without actually allowing foreign ownership or control. India has recently opened up its carriers to investment by foreign airlines, which has allowed Etihad to make a significant investment in Jet Airways. The Directorate General of Civil Aviation is currently introducing measures, such as limiting the number of foreign directors that can be part of a joint venture, that are designed to prevent newly permitted foreign investment from resulting in a transfer of control abroad.
Because of the need for capital, States have become more accepting of foreign investment in airlines. However most still want to have their cake and eat it too, with foreign money coming in, but control remaining local. States will eventually have to decide whether efficient capital allocation or strict ownership rules are of greater importance.