Air Kerala grounded before take-off? Major Gulf NRIs not keen to invest

Most of them interested in investing once international operations begin

The much-talked about Air Kerala project seems unlikely to take off as major Non-Resident Indian investors from the Gulf have second thoughts about investing in what they believe is a ‘risky’ venture. 

Though the Kerala Chief Minister Oommen Chandy announced that Air Kerala will take off by next Vishu ( April 13, 2013), major investors are dilly dallying. This after serious lobbying to get special permission from the Civil Aviation Ministry to start international service, did not yield any progress.
“The Air Kerala project envisaged by the Government of Kerala is expected to have a start-up capital of Rs300 crore. The entire capital for this project is proposed to be raised through equity participation from interested investors,” said Noel Thomas, Chief Executive Officer, Norka Roots.
“The deadline was November 30, 2012, the response has been lukewarm. The big groups are dilly dallying. They want common people to invest and start domestic service. When international service is added, they are ready to make big investments. Investment involves risk and the big investors want the ordinary shareholders to put their money,” said a source associated with the Air Kerala project.
Kerala Chief Minister Oommen Chandy is not keen to do put the entire risk on common investors, which will affect the government image, in case the airline fails to take off.
Meanwhile, Indian community associations such as Indian Association Sharjah are against the proposed airline being controlled by a few big businessmen.
Air Kerala, will be 26 per cent state-owned with non-resident Keralites and business groups holding the remaining shares worth Rs10,000 per share. While there is a scramble for the control over the board of directors, the Civil Aviation Ministry is under pressure. “If it allows the Kerala Air to start international service in the beginning, there are five other proposed airlines from states like Tamil Nadu, Andhra Pradesh and Delhi has obtained No Objection Certificates. If Kerala Air is allowed to start international service in the first year itself, other airlines will also come forward with similar demands. This will put further pressure on the existing carriers,” said sources familiar with the situation.
Air Kerala may not get permission to start international services, at least within the first year itself; causing a total U-turn in the attitude of Gulf based NRI groups. Organisations like the Kerala Muslim Cultural Centre, Indian Overseas Congress are also trying to raise fund for Air Kerala.
“Many of the NRI groups which promised to invest money for Air Kerala have backtracked, at least for the time being, because they are aware of the debacle facing King Fisher Airlines. They don’t believe that the airline will make much profit or business, by running only a domestic service in the first five years,” said a source.
However, another investor, said, “There is no major problem for the airline because if one NRI group withdraws others are ready to take that role. All the community associations and members are actively supporting the project. Fujiarah International Airport is keen to promote Air Kerala to improve traffic.”
“Four leading Gulf-based NRIs from the UAE, Oman, Bahrain and Saudi Arabia, had offered to invest between Rs50 crore and Rs100 crore. Similarly, thousands of employees wanted to purchase share in the proposed airline. One NRI group with more than 6,500 employees in the Gulf promised to invest Rs100 crore and wanted shares for each of its employee. Another group with 35,000 Indian employees promised to invest Rs50 crore and similar promises were made by the Oman based NRI group too,” sources familiar with the Air Kerala project said.
CIAL (Cochi International Airports Ltd), which manages the Cochin International Airport too promised to invest in the project, expecting the airline will start international operations catering to the large number of Non Resident Keralites in the Gulf and other parts of the world.
The State Chief Minister announced that the plan was to apply to the Director General of Civil Aviation after raising Rs100crore from NRI groups was not an easy task, as he stated earlier.
During the recently held Emerging Kerala investors meet in Kochi, representatives of various Indian community associations extended overwhelming support to the Air Kerala project, including equity participation.
Noel Thomas, said, Norka Roots had written to various Indian community associations in the Gulf to cooperate with the agency in raising funds for the project and even organised events for investors to canvas funds for the project.
The airline will take off only if it has about 20 aircraft and will be allowed to start international operations only five years after proving its credentials in the domestic routes.


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