The Indian Government's latest plans to sell an equity stake in Indian Airlines this year has drawn interest from major Indian corporations. These include Sahara Group of Industries, parent company of Sahara Airlines; the Tata Group, which had planned to launch an airline in a joint venture with Singapore Airlines; and Hinduja Group, which operates a cargo service with Lufthansa.

Finance minister Yashwant Sinha announced in 1998 that the Indian Government wanted to sell a 51% equity stake in Indian Airlines to a private party through a bidding process. The sale will be carried out within the framework of domestic air transport policy, which states that bidders should not have more than 40% foreign equity.

The government says that 26% of the equity (out of 51% on offer) may be given to a joint venture or strategic partner. The remaining 25% will be offered to employees, financial institutions and the public. Foreign airlines will not be allowed to bid. However, non-resident Indian companies can participate.

The government says the joint venture partner will be given a free hand in running the airline, under the supervision of the directors. This would be clearly defined in a shareholders' agreement, keeping national security and possible emergency requirements in view. An inter-ministerial group, assisting in the disinvestment process, is seeking a suitable global adviser.

The carrier has an equity capital of only Rs1 billion ($24 million) but a fleet of 56 aircraft. With its subsidiary, Alliance Air, it flies to 57 domestic and 17 international destinations. The airline has made marginal profits since 1998 having previously suffered losses for about five years. In the year to March 2000 it expects a net profit of about Rs390 million.

In a related development, the government has decided to lease out five major airports - Bangalore, Calcutta, Chennai, Delhi and Mumbai - to private investors for periods of 30-59 years. The government decided last year to corporatise the airports, but prefers the long-term leasing route to developing the airports to international standards.

The civil aviation ministry will soon issue lease guidelines and terms and conditions for sharing revenues earned from the airports, the government says.

Source: Airline Business