A suitable partner

No doubt conscious of the fact that private sector investors are not exactly beating a path to its door, the government has had to ensure that buying into the loss-making airline is genuinely attractive. Two factors make it worthwhile for the strategic partner. One is getting full management control. The exact arrangement is to be worked out when the deal is signed but it is essential to make the government8217;s role clear at the start. Although it remains a major shareholder it will stand back and will not interfere with management decisions. Without an understanding on those lines it would be impossible to get major new investment for the airline. Second, the strategic partner can have one or more foreign partners who can take a maximum stake of 26 per cent. The Disinvestment Commission8217;s recommendations have been followed in the main except for one crucial difference raising the foreign entity8217;s stake to 26 per cent which gives it the power to veto company board decisions. It is thought this is the minimumnecessary to bring a foreign partner on board.

As pragmatic as the 26-per-cent decision is, it is also bold when seen against the qualms that have dogged government decision-making in the aviation sector in the past. Given that the most promising foreign partners for Air India are thought to be foreign airlines with management expertise and financial resources, and recalling the brouhaha over the Tata-Singapore Airlines project, it is striking there are no caveats on Air India8217;s would-be strategic partners. It is a relief altogether that the disinvestment process is being seen in terms of what is commercially viable instead of linking all manner of extraneous factors with it. What remains is putting the long-delayed disinvestment plan into action. In a rapidly changing global business environment, time is of the essence. After a long spell of falling revenues, and the increasing challenge big carriers face from small, flexible operators, mergers and buyouts are becoming major trends in the airline business. If Air India takes too long to find a suitablepartner, the disinvestment plan may turn out to be a case of offering too little too late.

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