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INDIA BUSINESS WORLD - October 1st - October 15th - 2008
LUFTHANSA INVESTS $700M FOR A FORAY INTO INDIAN CARGO BIZ
LUFTHANSA Cargo, the airline subsidiary of German carrier Lufthansa Airline Group, one of the largest airlines in Europe, is investing $700 million for a foray into the Indian air cargo business. It is believed to have entered into a joint venture with an Indian company and will sign the memorandum of understanding (MoU) later this week, sources involved in the deal said. The investment of $700 million includes both debt and equity.
The business plan of the proposed JV is to be decided by end-October, based on which the term sheet will be filed. “The company is looking at a fleet size of 20, out of which two fitted-out aircraft (refrigerated and non-refrigerated) are company owned and 18 will be leased out in a phased manner,” said a source close to the development. The new entity would be a full-fledged cargo company with services that include export and import, both domestic and international. When contacted, Nils Haupt, director corporate communication at Lufthansa’s Frankfurt headquarters, said: "I do not have any knowledge about a $700-million joint venture with an Indian airline. I am sorry that I can’t help you."
However, it's learnt that the JV company will be headed by an expatriate from Lufthansa and the services will be fully operational by 2010. India’s civil aviation policy caps foreign direct investment (FDI) in the domestic aviation industry at 49%, barring sectors like cargo, maintenance repair and overhaul, and ground-handling at airports.
It does not allow direct or indirect investment by foreign carriers.Lufthansa Cargo is the logistics services provider in the Lufthansa Airline Group and is one of the world's largest cargo carriers, with a freighter fleet comprising 19 MD-11F aircraft. The cargo airliner also markets the belly capacities of all of Lufthansa's passenger fleet as well as the capacities of Jade Cargo International from Europe.
Several Indian companies are looking to tap the growing demand for air cargo movement.
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