The Indian government has unveiled plans to sell up to 60% of Air India, with up to 40% earmarked for sale to a strategic partner, subject to a 26% ceiling for foreign parties, and 20% for employees and domestic investors. Furthermore, there is a suggestion managerial control will be put into the hands of the private sector partner, though it remains to be seen whether or not India's government can stomach private sector efficiencies.
Loss-making Air India has over 18,000 employees and an ageing fleet of 26 aircraft, against which Singapore Airlines, one of the most profitable carriers in the world, operates its relatively new fleet of 92 jets with a workforce of less than 14,000 people. Singapore Airlines is majority-owned by the Singapore government, but the company's management is very much in control. At Air India, it is government bureaucrats that hand down decisions at almost every level.
Potential investors in the airline will be well aware the Indian government does not propose to stand aside and permit new management, particularly foreign, to come in and slash Air India's workforce, which prompts the question: what then are the airline's attractions?
Of primary interest to other carriers are Air India's landing rights, of which only about 50% are used. It remains to be seen whether or not these rights will be included in the Air India privatisation or retained by the government, which negotiated them in the first place. Also, any strategic partner would want some means of realising its investment in the future.
Analysts say Air India would prefer a western strategic partner over one of its Asian rivals. Names in the frame include Air France, KLM, British Airways and Lufthansa. In Asia, only Singapore Airlines and Cathay Pacific are seen as possible bidders.
Advisers for the privatisation of Air India and its domestic counterpart, Indian Airlines, are expected to be announced within the next month and the sales should proceed about 10 months after that.
