India’s state-owned airlines are moving forward with plans for initial public offerings (IPOs).
The initiatives are aimed at helping them raise cash for expansion to compete more effectively against rapidly expanding private carriers. Main national carrier Air India is preparing to select a merchant bank to act as advisor for its proposed share offering. It has shortlisted six companies from 15 merchant banks that applied for the advisory role. Air India began searching for a financial advisor in May, after the carrier’s board gave in-principle approval for an IPO.
The board of fellow state-owned carrier Indian Airlines has meanwhile launched its own search for an IPO advisor. Like Air India, its board gave in-principle approval earlier this year for an IPO.
India’s government has suggested it is in favour of the two airlines having IPOs, which would help them raise cash for expansion in a market where privately owned operators are expanding rapidly and new players are being launched. The IPO plans come as both airlines continue to seek approval for long-delayed fleet expansions.
In 2001 the then-government attempted to sell stakes in both Air India and Indian Airlines but the divestment plan was ultimately scrapped. In Indian Airlines’ case the final two bidders were disqualified while in Air India’s case the sole remaining bidder – Singapore Airlines in partnership with local conglomerate Tata – withdrew.
Although both Air-India and Indian Airlines have plans for major fleet acquisitions, their inability to place orders means leasing in aircraft to boost capacity in the short-term. Air-India, for example, recently dry leased three Airbus A310s to expand services to east Asia, and is looking to lease four more Boeing 777s from October, while Indian Airlines wants 10 more leased A320s.
Indian civil aviation regulators are creating a “slot pool” for the country’s airports to give new airlines opportunities to develop their operations and allow existing airlines to retain existing slots.
Civil aviation minister Praful Patel told the Indian parliament that slots will first be allocated to established airlines “on the basis of historical rights” for a new operating season. Of the slots left over, he adds, 50% will be allocated to new entrants.
“The slot allocation policy ensures a level playing field for the public and private sector as it is non-discriminatory and the airport operator is expected to implement the slot allocation policy in a fair and equitable manner,” says Patel. The creation of the slot pool is intended “to promote entry of new airlines”, particularly at busier airports, he adds.
Patel has meanwhile denied that the government plans to raise entry barriers to make it financially more difficult to launch new airlines.
NICHOLAS IONIDES/SINGAPORE
Source: Airline Business
