EOpriv: GREAT ESOP OPPORTUNITY IN INDIA ALA United Airlines

[Dan Bell <dbell@kent.edu>]

Another step toward sale of Air India taken 

Thursday, July 05, 2001 NEW DELHI: 

The government said on Wednesday it wanted Indian nationals to dominate the 
board of a privatized Air India as it moved a step closer to selling a 
controlling stake in the international carrier 
Disinvestment Minister Arun Shourie made the announcement to reporters as he 
said the privatization panel had approved the shareholders' and share 
purchase agreement for offloading a 40 percent stake in the money-losing 
airline. The agreement spells out the extent of the winning bidder's control 
over Air India. 

``Two-thirds of the board should be made up of Indian nationals at all times. 
The chairman and managing directors shall always be Indians,'' Shourie said 
after the meeting of the panel headed by Prime Minister Atal Behari Vajpayee. 

The announcement was seen as a clear sign that India wanted the airline to 
retain its distinctive Indian character. 

He also said the government would have the right to nominate three directors 
and four independent directors would be appointed in consultation with the 
strategic partner but did not disclose how many members the board would have. 

There are just two bidders for the airline whose sell-off is seen as a litmus 
test of the government's commitment to privatization of large state-run 
companies. 

Singapore Airlines(SIAL.SI) has teamed up with the Tatas, one of India's 
largest industrial groups. The second bidder is Madras-based truck and 
bus-maker Ashok Leyland (ASOK.BO) controlled by the British-based Hinduja 
brothers. 

NEED BID CLEARANCE 
There has been widespread media speculation that the cabinet committee on 
security due to meet on Friday might not clear the Hindujas' bid because of 
charges they face of receiving kickbacks from Sweden's Bofors in a $1.2 
billion artillery sale to the Indian army in 1986. The brothers deny any 
wrongdoing. 

The minister said last week India would proceed with the privatisation even 
if only a single bidder is left in the fray as long as the reserve price is 
met for the carrier which has lost money for the last seven years and has a 
fleet of 25 aircraft. 

The government had said it wants to complete the privatisation of Air India 
but Shourie last week declined to give a timeframe for completion of the 
sale. 

The minister said the Disinvestment Department would invite financial bids 
for Air India once outstanding issues were sorted out by the cabinet such as 
sales tax exemption on aviation turbine fuel. ``It will be soon,'' he said. 

Shourie also announced a stock option plan for airline employees under which 
they would get 10 percent of the shares at face value of 10 rupees. This 
would work out to about 850 shares per employee. There would be a one-year 
lock-in period. 

Shourie said there would be no retrenchment in the first year and afterwards 
there would be a voluntary separation package that should match the scheme on 
offer at the time of disinvestment. 

Air India has around 17,800 employees and is viewed in the aviation business 
as a bloated airline with one of the highest employees to aircraft ratio. 

The shareholders agreement stipulates that the strategic partners shall not 
allow any ``prohibited person'' to acquire a controlling interest in the 
airline. Shourie defined a prohibited person as anyone prejudicial to India's 
security and said this would be determined by the Home (Interior) Ministry. 

Prior approval of the government would be required for the transfer of shares 
by the strategic partner and no transfer should take place to a competitor of 
Air India. 












--
Dan Bell
International Program Coordinator
Ohio Employee Ownership Center
Kent State University
Kent, OH 44242
(330) 672-0333 << New direct number!
(330) 672-4063 fax
dbell@kent.edu
http://www.kent.edu/oeoc/
http://cog.kent.edu