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Government to give up management control of Air-India

The government will give up management control of Air-India after it sells 40 per cent to a strategic partner, said Union Civil Aviation Minister Sharad Yadav, who recently cast a cloud over the fate of the sell-off by suspending the airline's independence-seeking boss.

The suspension of Air-India managing director Michael Mascrenhas ignited concern that the aviation minister was bent on scuttling the privatisation. The action aroused fear that the government may continue to meddle in the running of the airline, which has lost money during the past consecutive seven years.

"I want the airline to be privatised , so that things move efficiently and decisions are taken quickly," Yadav said in an interview.

"The decision to sell the airline was a cabinet decision, reached by consensus. I was part of that decision. Why should I be against it now?"

To allay concern over the government's influence over how the airline is run, New Delhi will sell a further 11 per cent to the airline's employees, thus relinquishing majority control, a senior ministry official said during the same interview.

In May last year, the cabinet approved a plan to sell 60 per cent of the airline -- 40 per cent to a strategic partner, 10 per cent to the airline's employees and another 10 per cent to financial institutions or investors through an initial public offering.

The aviation ministry official indicated the government may still sell 10 per cent to the public, though not anytime in the foreseeable future.

Divestment minister Arun Shourie, who is responsible for overseeing the process of privatising government-owned companies, warned that incidents such as suspension of the Air-India chief executive could unnerve the only two bidders for the airline which has lost Rs 10 billion the past seven years.

Shourie said the two bidders would likely seek reassurances from the government through the signing of a shareholders' agreement. Experts say the bidders will now ask that the airline's management be free of political interference.

Yadav said that the new management would be left to function independently once the airline was privatised.

"As long as the airline is run by the civil aviation ministry, I have the right to remove the managing director," he said. "But once it is privatised, the new management will take all the decisions."

Bidding process

Only two bidders have come forward for the 40 per cent stake in Air-India that the government wants to sell to a strategic partner with the resources and expertise needed to bring the airline out of a nearly decade-long nosedive.

One of the bidders -- and the one considered to have the best chance of grabbing control of the Indian flag carrier -- is a consortium composed of Singapore Airlines, a major power in the Asian air industry, and the Tata group, one of India's largest and most influential industrial groups.

The other bidder is the UK-based billionaire Hinduja brothers, who are being advised by Lufthansa Consulting Gmb, a unit of Deutsche Lufthansa AG, the holding company of the German airline.

Both bidders have completed inspecting Air-India's financial records and operations and are in talks with the government to finalise a shareholders agreement.

Once this is done, they will be asked to present their actual bids, or the amount they are willing to pay for the airline with a fleet of only 25 aircraft.

Air-India, whose network once included most of Europe, now flies predominately Gulf routes, with only a few flights daily to other major destinations in East Asia and North America.

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