Airline shares rise on FDI expectations

Shares of struggling Indian airlines rose yesterday on expectations the government would decide this week to allow foreign airlines to invest in domestic carriers.

The move would serve to bail out cash-squeezed Kingfisher Airlines, controlled by billionaire liquor baron Vijay Mallya, which desperately needs funds to implement a turnaround plan. (See: Will Mallya pay Kingfisher tax dues today?)
In a note, the commerce ministry has sought comments from other ministries and a decision could be approved at a cabinet meeting tomorrow, according to an unnamed top government official quoted by AFP who requested not to be identified.

"It is correct -- a decision could come this week," the official told AFP, commenting on domestic news reports.

Shares of Kingfisher Airlines shot up around 9 per cent to Rs20.30 on the Bombay Stock Exchange, bucking a weaker overall market. Jet Airways rose 6.34 per cent while SpiceJet gained 6 per cent.

Foreign airlines are not allowed to take stakes in Indian airlines though other foreign investors can hold up to 49 per cent.

Foreign carriers had already been allowed in by the aviation and finance ministries pending cabinet approval.  Domestic investors have been wary about putting their money in Kingfisher considering its dire financial status.