Heated debate on in aviation industry

NEW DELHI, APR 21: A heated debate is on in the Indian aviation industry on the quantum of equity of the Air India (AI) to be given to a f...

NEW DELHI, APR 21: A heated debate is on in the Indian aviation industry on the quantum of equity of the Air India (AI) to be given to a foreign strategic partner with one group wanting the stakes to be limited to 25 per cent and the other seeking at least 40 per cent, saying anything less would not be attractive for any investor.

However, FICCI, in its comments on the Draft Civil Aviation policy, has recommended that besides 25 per cent stake to foreign partner, another 26 per cent should be offered to Indians and NRIs and the management control of the airline should remain in the hands of Indian partners.

However, sources in the aviation industry said that no world-class foreign airline, which is a stable corporate entity and is profitable, with 25 per cent stake would be interested "only in harvesting and feeding its own carrier" instead of investing in AI’s fleet, infrastructure and facilities.

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They said a strategic partner, with less than 40 per cent stake, would be vulnerable to hostile take-overs especially when AI is back on rails and starts earning profits.

The foreign partner would also like to have management control as it would like to be party in major decisions which would determine AI’s future investment and direction of business, they said.

It is impossible to find a partner who would invest one billion dollar for a 25 per cent stake and still not gain effective management control of the airline, they said.

These sources also said that given AI’s present financial status, investing in the carrier would be "high risk" and hence the strategic partner’s shareholding should give high returns.

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Since the Finance Ministry has already declared that government had no money to spare for the much-required deposition of funds for AI, funds for its aircraft acquisition programme would have to be raised by disinvestment, they said.

This showed the necessity of giving away at least 40 per cent shares to a foreign strategic partner instead of a mere 25 per cent, they added. The debate on the quantum of stakes is also going onbetween the ministries of civil aviation and disinvestment.

While Civil Aviation Ministry favours grant of 25 per cent shares of AI to a foreign strategic partner, the Disinvestment Ministry argues that this would neutralise the

Meanwhile, Civil Aviation Secretary Ravindra Gupta last night announced that the global advisor for suggesting ways and means to divest the stakes of Air India has been identified.

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Gupta, while addressing a FICCI session on the national aviation scenario, said steps would be taken to arrange code-sharing between Indian Airlines and AI and full utilisation of rights by both airlines for them to make money.