Two interesting developments in the aviation industry last month have given the world yet another example of just how dynamic, even in lean times such as these, that the aviation business is in Asia and the Middle East truly is. The first, the announcement that Qantas is ending its long established partnership with British Airways and establishing a new relationship with Emirates, although much rumoured in recent months, still came as a surprise.

While Emirates’ rapid expansion has attracted fierce criticism from from many parts of the world including Australia, the move by struggling Qantas was clearly a pragmatic one aimed at helping the carrier regain its footing. And ironically the move is also believed to be aimed partly at staving off increasingly ferocious competition from another Middle East carrier, Etihad, which has been continually ratcheting up its focus on the Australia market – most recently with the raising of its stake from five to 10 per cent in Virgin Australia.

While Qantas is outsourcing much of its European flying to Emirates, which will certainly boost traffic through its Dubai hub, Qantas gets access to a vast network while Emirates gets greater access to Australia’s domestic market. Another positive for Qantas, it will be freed up to focus more on Asia, an area rife with opportunity, but also prickly with all manner of competition. The second development was perhaps not so much a surprise as it was a relief. India’s national government recently, finally, came to the decision to allow 49 per cent foreign direct investment (FDI) in the aviation sector there. Although this is clearly no ‘silver bullet’ for the country’s diverse and financially troubled industry, it may well be the impetus for a more structured and solidly founded industry that can grow sustainably with the help of the expertise of foreign carriers.

At least two major issues still pose significant challenges when it comes to carriers – the financial mess that is both Air India and Kingfisher. Unfortunately the government has again chosen to shelter its dysfunctional child from the cruel realities of the world by excluding it from FDI. This is sure to continue to distort the Indian aviation market until the powers-that-be grow some courage and bite the proverbial bullet and puts their wayward child through some intensive therapy – perhaps even electric shock therapy.

But still other questions remain: Will Kingfisher be able to get the much needed cash infusion to keep its operations afloat? Analysts are not very optimistic as many feel that the government’s decision has probably come too late. Other more significant questions include, will this decision to allow foreign airlines to invest benefit existing airlines? Will it see the birth of new airlines promoted by foreign capital?

One thing is fairly clear amongst industry pundits: SpiceJet and GoAir are likely to be the two most preferred airlines for FDI. The reasoning going something like this: Both are backed not by long-time airline executives, but rather by entrepreneurs who invested in the business unencumbered by old ways of thinking within the confines of the traditional aviation paradigm – think Richard Branson and Tony Fernandes.

While most international airlines have declined to comment on whether they will be taking a look at plunking some Rupees down on Indian carriers, even the casual aviation observer would surely point to airlines from the Gulf and Asia, particularly Southeast Asia as most likely candidates. Indeed, Etihad Airways is reportedly already in talks with Jet Airways and AirAsia’s Tony Fernandes has also uttered positive refrains on the FDI move.

Only time will tell, but at least one thing is clear – the long awaited decision was the correct one for the Indian commercial aviation sector, it’s just a shame that the Indian government has once again chosen to do more harm than good by not acting more decisively on crippled Air India.