With the bears now firmly in control of every stock market in the world, any sane government thinking of selling off its state-owned airline should be reaching for the telephone to inform its financial advisors to put away the sale prospectus until the bulls are back in control of share prices.

The value of even blue chip airlines like British Airways and Lufthansa has tumbled. Stock market interest in air transport shares is at rock bottom. Only those considering a fire sale or a privatisation for ideological reasons should be venturing into a flotation. The alternative now is to sell off assets which are in some cases worth little more than half the price they could have demanded at the start of the year.

Austrian Airlines has already seen the writing on the wall and called a halt to the first phase of its privatisation until market conditions improve. Others such as Air France and Italy's Alitalia should be giving serious thought to following suit. Unfortunately, a number of airlines are not in the relatively comfortable position of Austrian in being able to shelve the privatisation process until the markets improve.

In Asia, probably more than anywhere else, governments may now have little choice but to press ahead. There, they are looking down the barrel of a gun loaded by the International Monetary Fund which is piling pressure on to governments to sell off their state assets in return for much needed loans. Time is running out for them to wait for the local "bourses" to get enthusiastic about investing in near-worthless airline stock before they sell. Stock prices are at an all-time low and airline shares have been trading at, or below, their actual asset value. The apathy of local Asian financial markets about airline stock should be a sufficient wake-up call to the struggling Asian flag carriers and their proud state owners to the fact that the days of national carriers for every country with world networks are fast drawing to a close. Waiting for local investors to appear as "white knights" is tantamount to a very slow and painful death.

For those airlines with strategic interests, attracting foreign investment from one of the major players in a global alliance may be one of the few viable answers available.

What is certain is that wider economic pressures are making it very difficult to provide funds to continue to bail out inefficient flag carriers. Unless airlines like Indonesia's Garuda, which have neither global alliance partners nor foreign investment prospects, are made more attractive for sale, they will be left on the shelf to wither. Those who miss the global alliance partnership train face a future of shrinking back into nothing more than regional carriers simply because they won't be able to compete with the likes of oneworld or the Star Alliance - a prospect which may well await carriers in other parts of the world, including Europe.

The good news for at least some of Asia's airlines, private or state-owned, is that despite their chronic problems there are a number of major international carriers going in search of bargain buys in the region. Some are armed with a war chest of money, the purchasing power of which has been significantly enhanced by the weakness of Asian currencies relative to sterling, dollars and deutschemarks.

Witness the number of carriers beating a path to Bangkok at the prospect of a sell-off of Thai Airways International stock. Waiting in the wings are those with global ambitions such as British Airways and Lufthansa. Singapore International Airlines is also a contender, although its aspirations in this instance are regional rather than global.

The experience of Philippine Airlines holds a lesson for Asia. Having finally broken the unions, the carrier is a much more attractive proposition to foreign buyers and it certainly is in need of a fresh injection of capital. PAL was privatised some five years ago, and its roller coaster performance since then and epic soap opera industrial disputes are a clear warning to investors of the risks they take in investing in airlines.

Sadly, for Asia, sitting out the financial market turmoil until stability returns is just not an option, unlike for the majority of European state-owned airlines which have largely already put their houses in order.

Source: Flight International