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More air pockets

THE AIRLINE DISINVESTMENT programme, that was scheduled to take off by August, seems to have run into the sort of dense fog that usually cripples flights into and out of New Delhi each winter. First it was a rewriting of the eligibility rules that disqua lified two bidders, the Hindujas and Videocon, from the race. Effectively that left Indian Airlines without a claimant, and Air India with only one, the Tata-Singapore Airlines combine.

Now it transpires that Singapore Airlines might be having second thoughts about having a tilt at Air India. In that event, the Tatas might either have to fly solo to win the strategic stake in what was once their own airline or hurriedly hunt for another wingman. The Minister for Disinvestment, Mr Arun Shourie's labours are far from over.

Admittedly, selling the two airlines is no easy proposition. Normally, cattle are well-fed and watered before they are taken to the shandy: they must look meaty and valuable. But look at the preparation for the airline divestment. Indian Airlines is wan and battle-worn, a vintage battalion competing with a young, motivated Jet Airways, its once monopolist position reduced to a market share of just about 50 per cent and falling. Air India has fared no better, indeed worse. With the protection afforded by bilateral agreements, Air India should carry half of the international traffic. It does less than a fifth. Some of the traffic has been bartered away for a song, others have been lost because of an inferior offering. We thus have in the ring two specime ns hardly in shape for the parade. It is not surprising that there were not too many bidders. For the Tatas, it is nostalgia that probably retains them in the fray.

Mr Shourie needs to make the best of the bad bargain. Air India, as an airline, has little attraction intrinsically. Its fleet is shockingly old, and unrenewed. It is overstaffed, by international benchmarks. The residual government stake after disinvest ment and the potential bureaucratic interference that it represents all add up to a highly unattractive proposition. However, the traffic rights it enjoys as the national airline are quite valuable. These rights for a few years are being bundled into the Air India sale to make the offering look worthwhile. But now that the issue could well go into hold, the Government would be better off selling the rights to various routes in a disaggregated manner by inviting competitive bids. How would it matter to t he government of tomorrow whether it is a privatised Air India that uses the bilateral rights or any other domestic privatised airline? It should not, as long as these are auctioned in a transparent manner for the highest fee.

Indian Airlines would require a re-bid. While Videocon has withdrawn after the disqualification was announced, the Hindujas have not. These promoters personally might be tainted, but it is not clear how that rubs off on their companies in which there is a sizeable minority shareholder presence. The personal culpability or otherwise of individuals should not affect the prospects of companies in which they might be principal shareholders. It is a legal tangle that the Government has quite needlessly got i nto; when it will unravel is anyone's guess.

What is easy to predict is that there will be a delay in the disinvestment process. And delay implies the two airlines continuing to fly with old wings and losing further ground to tougher, powerful opposition. Cussed policies have ensured a lose-lose si tuation for the exchequer.