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A-I, IA sale grounded for now

Sidhartha & Gaurav Raghuvanshi

Notwithstanding the interest shown by various international carriers, including Malaysian Airlines, the ministry of civil aviation is against divestment of the government equity in Indian Airlines and Air-India this year.

Government officials told Business Standard that given the slowdown in the global aviation sector, the sale of government equity in the two airlines might not generate much interest.

Instead, the government intends to improve the performance of the state-owned carriers and beef up their infrastructure. "This will also help us get a better valuation when we finally go in for divestment," the sources said.

However, Divestment Secretary Pradip Baijal has said the government is still keen on selling the two airlines but is constrained due to lack of buyers.

"Find me a buyer, and we will sell both Air-India and Indian Airlines," he said when asked to comment on the divestment of government equity in the two carriers.

The Malaysian government is learnt to have sought details about the status of Air-India's divestment for Malaysian Airlines to pick up a stake in India's international carrier.

After postponing divestment in the two airlines last year, the government had planned to reduce its holding in the two airlines during the current fiscal.

Meanwhile, the ministry of divestment has circulated a note on the model for privatisation of the two airlines. The proposal, at present under the consideration of the government, involves a two-stage divestment of the carriers, based on the Lufthansa model.

As per the formula, the government will first issue new shares to induct a strategic partner in the airlines, use the funds to turn the company around and then sell its stake to the public in the second round. This will ensure the airlines get their much-needed fund infusion and the government a good price for its stake in the second round of divestment.

The board of Indian Airlines last week cleared a proposal to induct 43 Airbus aircraft for over Rs 100 billion. A fleet expansion plan for Air-India is also on the anvil.

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