Will FDI in civil aviation end the sector’s troubles?

On 17 December 1903, the Wright Brothers made the first controlled and powered human flight and fulfilled mankind’s dream to fly, and in December 1912, with the first flight between Karachi and Delhi, the history of civil aviation began in India. This led to the formation of Tata Airlines in July 1932, India’s first airline company, which subsequently became Air India.

Until the early 1990s, India’s aviation industry was heavily regulated. Foreign and private domestic airlines were restricted from operating air services, and the state-owned Indian Airlines enjoyed a monopoly.

Then, with liberalization of the Indian economy, the civil aviation sector was opened up to investment. Foreign direct investment (FDI) in airports was permitted up to 100% under the automatic route, and 49% FDI was permitted in air transport services under the automatic route, subject to certain conditions.

Pankaj Agarwal is a partner and Archana Trivedi is an associate at the Ahmedabad offices of Amarchand & Mangaldas & Suresh A Shroff & Co. The views expressed in this article are those of the authors and do not reflect the position of the firm.