The Indian Government has started the process of privatising Air India with the announcement of a scheme which could see its holding reduced to around 40% as foreign airlines, institutional investors and staff are offered a share of the ailing national carrier.

The government's Disinvestment Commission has recommended a series of steps to pump in fresh equity to improve the company's balance sheet and provide funds for a badly needed update of the fleet.

The decision to give up control of Air India is part of a wider privatisation plan for state-owned enterprises.

If the plans survive the fast changing nature of Indian civil aviation politics, the scheme will allow a combination of foreign airlines, foreign non-airline investors, local institutional investors and staff to take a stake a controlling interest of up to 60%. It is expected that some fresh equity will first have to be paid into the company by the Government to redress its under-capitalisation.

The recommendations have caught observers by surprise as recent government policy has barred foreign airlines from investing in private domestic carriers -a policy which drove the Tata Group to abandon attempts start an airline recently.

Source: Flight International