Air-India set to kick off sell-off process

India is all set to kick off the partial privatisation of its state-owned international carrier Air-India early this week, company officials said on Monday.

They said Air-India would put out advertisements inviting "expressions of interest" for a 40 per cent stake in the loss-making airline "in a day or two."

The Indian government plans to sell a 60 per cent stake in the airline. Forty per cent would be sold to a "strategic investor" (of which a foreign airline can hold a maximum 26 per cent) and 20 per cent to employees and financial institutions.

Reports last month said that three consortia were waiting on the sidelines to submit their bids.

British Airways and India's domestic private Jet Airways form one consortium, while Singapore Airlines and the Tata Group make up the second combination.

Air France and Delta Airlines form the third consortium, while domestic business houses such as Reliance Industries and ITC are also reported to be interested.

"Air-India is a good buy for anyone even in its present state. There will be strong interest in the proposal," said Pulak Sen of the trade magazine Indian Aviation.

Sen said India's geographical location and low domestic employee costs made the airline an attractive proposition.

But he warned: "Air-India needs a huge infusion of money to revive it. Its fleet has depleted, its routes are not being utilised fully and it is overstaffed."

Air-India managing director Michael Mascarenhas recently told reporters the airline had improved its on-time performance, its fleet utilisation and other crucial parameters.

However, he conceded that the airline was "definitely overstaffed," at 680 employees per aircraft as against the global norm of 350 employees per aircraft.

"We have generated net profits for 36 of the 47 years since nationalisation. Losses began since 1995-1996," he said.

Mascarenhas said that Air-India was waiting for the government to approve an "attractive and generous" voluntary retirement scheme for its employees.

"Once the scheme is announced we expect to get rid of another 1,000 people, reducing our staff to 16,500 people," he said.

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