With the election results out, the issue of foreign direct investment (FDI) in domestic carriers is likely to gain momentum. Aviation industry experts believe that allowing foreign airlines to buy stake in domestic airlines would be part of the new government’s agenda.

“FDI in airlines is not because the government is interested in it but because the airlines want it. The domestic carriers are in bad financial situation. They need investments. It is very much possible that the issue would be a part of the government’s agenda now,” said Kapil Kaul, chief executive officer of Centre for Asia Pacific Aviation (Indian sub-continent & West Asia).

The government has been considering a proposal to allow foreign airlines pick up 49 per cent stake in domestic carriers to help them overcome their financial crisis.

A senior ministry official said that though the ministry has been working on the proposal, nothing has been firmed up yet.

Private carriers such as Kingfisher and Jet Airways have been grappling with their balance sheets. While Naresh Goyal-led Jet Airways posted Rs 214-crore net loss in the third quarter ended December 2008, Vijay Mallya’s Kingfisher Airlines reported a net loss of Rs 626 crore for the same quarter, registering a 48 per cent increase, compared to same period an year ago. Delhi-based low-cost carrier SpiceJet also posted a net loss of about Rs 18 crore in October-December quarter last year.

Mallya has been seeking government’s approval for FDI after international airlines including British Airways and Virgin were said to be keen to buy into Kingfisher Airlines. Even SpiceJet is open to the idea of foreign investment. However, Jet and the national carrier, Air India, have opposed the move. The ministry official said that the decision might take sometime, as there are so many stakeholders involved.

The urgency of allowing FDI in the domestic airline also arises from the fact that the combined debt of the top three airlines — Air India, Kingfisher and Jet — is around $8 billion.

According to International Air Transport Association (IATA), the global airline industry is expected to incur a loss of $8-8.5 billion.