EC grounds Air-India8217;s divestment plan

MUMBAI, AUG 3: The disinvestment of the government's 40 per cent equity in the loss-making airliner, Air-India has been shelved till the ...

MUMBAI, AUG 3: The disinvestment of the government8217;s 40 per cent equity in the loss-making airliner, Air-India has been shelved till the next government swears in. The airline was to initiate talks with Air France and Lufthansa this week when it was asked by the Election Commission EC to wait for the poll results.

The airline was planning to sell 40 per cent equity as per the recommendation made by the Disinvesment Commission. But due to the EC8217;s model code of conduct currently in place, the management decided against taking any step which could ruffle the feathers of the EC. In a similar situation, the finance ministry had taken permission from the EC for selling off VSNL shares which was granted after a lot of deliberations.

According to Air-India officials, any sell-off plan would now crystallise only in the last quarter of the current fiscal as the country would remain in election mode for the next three months. Similarly, the airline has decided to go slow on Hotel Corporation of India8217;s sell-offplan where it is disinvesting 100 per cent equity to a private party. The airline had even invited offers from merchant bankers to act as global consultants.

The airline is hoping that its declining losses coupled with expensive assets will fetch good price during the disinvestment process. In the first quarter ending June 1999, Air-India has considerably cut down its losses to Rs 6.4 crore as compared to Rs 80 crore loss in the corresponding period of last year.

Earlier, Air-India had initiated sell-off talks with Air France after the finance ministry asked it to select a strategic partner as a precondition to release a bail out package of Rs 1,000 crore. The entire sell-off plan and bailout package would now be decided by the new government. The sell-off plan, from initiating talks to conclusion of the deal, is expected to take three to four months. The airline was keen to tie up with Air France as the latter had a pact with the Transworld 8211; the global alliance recently formed between Air France andDelta Airlines. But as it is a government-owned corporation, it will have to invite tenders to extract the best price.

Foreign airline to get AI equity

MUMBAI: Air India8217;s strategic partner should be a foreign airline and not any domestic airline. This was essential to bring experience and technology of international standards in the management of AI, Civil Aviation Secretary P V Jayakrishnan said.

The civil aviation secretary, who is also presently the chairman of AI, said this in response to a query whether any domestic airline would be allowed to pick up a stake in the international carrier. Commenting on selection of aircraft for AI and Indian Airlines, Jayakrishnan said the management teams of both the airlines were currently looking at various types of aircraft, both short-capacity long range SCLR and medium capacity long range. No final decision has been taken, he added.