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`AI has to be cautious while choosing a partner'

Ashwini Phadnis

COLOMBO, June, 19

AIR India (AI) will have to be extremely `cautious' when tying up with a partner after the Government initiates the disinvestment process in the airline, the Chief Executive Officer of Sri Lanka's international airlines, SriLankan, Mr. Peter Hill, has sa id.

``Whoever takes over Air India has a big job on their hand. It is necessary for AI to find the right partner who understands, not only the business of aviation, but also business of AI,'' Mr. Hill told a group of visiting Indian newspersons.

SriLankan was in a similar position as the Government-owned airlines in India till the Sri Lankan Government decided that to increase airline profitability, the support of a strategic business partner was necessary.

The airline underwent corporate restructuring in April 1998 and Emirates Airlines entered into a strategic partnership with SriLankan to acquire a 40 per cent stake (26 per cent upfront and 14 per cent staggered over two years).

Officials, however, refused to specify what price was paid for the stake in SriLankan. ``The price at which the remaining 14 per cent shares will be sold two years later was all a part of the agreement which was signed at the beginning,'' officials said.

Mr. Hill, who was one of the executives who started the Dubai-based Emirates Airlines, felt it was essential that whoever partners AI must have a good track record in the aviation business.

But he was quick to add that privatisation was not the only panacea to turning around any airline. ``There is a necessity to motivate the staff and understand the culture and working of the people of the region. It is all a question of discovering ideas, which people have got, and a lot of our best ideas have come from within,'' he said.

Talking about the privatisation of SriLankan, Mr. Hill said the negotiations went on for close to two years before the final deal was clinched.

``One of the reasons why the privatisation process is a success in SriLankan is because the Government and the investor want to work together for the benefit of the airline. This is absolutely essential,'' the airline CEO said.

Officials said that, at the start of the privatisation process, they had to spend huge amounts of time explaining the rationale of privatisation to the staff. ``We had huge lines of staff standing outside our room and the phone would never stop ringing w ith calls from anxious staffers. But now the workers realise that they stand to benefit, especially as several of the staff have got pay hikes in excess of 70 per cent,'' Mr. Nigel O'Shea, Head of Information Technology, said.

From a small beginning with two leased Boeing 707 aircraft in 1979, SriLankan today has an all Airbus fleet of 12 aircraft, including four Airbus A-340 and five Airbus A-300 aircraft.