Logistics

One-year timeframe for AI sale may be a pie in the sky

Ashwini Phadnis New Delhi | Updated on January 11, 2018

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Nowhere in the world has a national air carrier been privatised so quickly

The Centre’s keenness to complete the divestment of Air India at the earliest with — talk of it wanting to finish the process in a year — needs to be considered with caution.

Worldwide, there are many examples of state-owned airlines being divested but none of the governments were able to complete the process within a year. For instance, even the Canadian government, which possibly took the shortest time to divest Air Canada, took about 15 months to complete the sell-off.

In comparison, the British government took seven years from the time that it announced its intention to move British Airways to the private sector and finally reaching its goal in 1987. British Secretary of State for Trade announced the decision to privatise BA in July 1979 and the process was completed in February 1987.

The situation is no better in France. In May 1993, the French government announced its intention to privatise 21 state-owned companies including Air France.

The carrier’s capital was open to private companies early in 1999. Its shares were listed on the Paris Stock Exchange for the first time on February 22, 1999 — close to six years after the government announced its intention of privatising the airline.

In Australia, it took the government close to two years to complete its stake sale in Qantas. In 1993, the Australian government sold a 25 per cent stake in Qantas to British Airways as the first step towards privatisation and in June 1995, it went in for a public float of the remaining shares.

The German government reduced its stake in Lufthansa in 1987 and 1989 by a total of 25 percentage points by not participating in two capital increases.

Germany’s state-owned airline Deutsche Lufthansa AG became a private company only in 1994, with the government disclosing plans to cut its 51.4 per cent ownership to a minority position.

Only the Canadian government managed to efficiently privatise Air Canada in 1988-89 in 15 months. It was able to start the privatisation process within six months of the April 12 announcement to issue Air Canada shares to the public.

This would allow Air Canada to compete more effectively in the newly deregulated environment.

Following the enactment of the Air Canada Public Participation Act on August 18, 1988, the airline was privatised in October 1988 with 45 per cent of the shares sold to the public. The rest of the shares were sold in July 1989.

Changed environment

When it comes to divestment of Air India, the aviation environment today is very different from what it was when the other international airlines were privatised. Whether this changed environment will work in the government’s favour remains a guess.

What is clear right now is that the clock for the divestment of the Maharaja started on June 28, when the Centre made its intentions clear.

However, the government is yet to make clear the basics of the privatisation of Air India, including how much equity it wants to divest and what the “universe of bidders” will be.

In such a scenario, the one-year time frame seems like a distant goal.

Published on July 25, 2017

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