Retail sector FDI brings cheer to Airline shares!

Even as the dust from the 51% FDI in the multi-brand retail segment and 100% in single-brand retail sector gets settled down, the shares of India’s airline carriers are smiling with the expectation of opening up of foreign direct investment in the aviation sector by foreign airline companies.

Currently, government allows 49% FDI in the aviation sector for all overseas entities, other than foreign airlines, in domestic passenger airlines. In fact, a draft note by DIPP has proposed 26% FDI by foreign airlines in domestic carriers.

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Most of the Indian carriers have reported unsustainable losses marred by higher fuel prices which have depressed their operating margins substantially. The country’s three biggest carriers – Jet Airways, Kingfisher and Air India – hold a combined debt of little of Rs.63000 crore.

With the clearance of FDI in the multi-brand retail segment, investors in airline stocks have come to believe that the UPA government is now opening up the doors to bring in major reforms to boost the sagging economy.

While the shares of Kingfisher Airlines were up 6% at Rs.26.65 on Indian bourses, the stock price of Jet Airways zoomed higher by 10% at Rs.272 on BSE Sensex.

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