Tata, SIA set to grab control of Air India

Tata, SIA set to grab control of Air India

NEW DELHI (AFP): The combined forces of Singapore Airlines (SIA) and the Indian Tata group look set to grab a 40 percent stake in state-run Air India after the only other bidder was disqualified, aviation experts said on Saturday.

The Indian government on Friday disqualified Britain's billionaire Hinduja group from bidding for a stake in Air India.

Arun Shourie, minister in charge of India's ongoing privatization process, said Prime Minister Atal Behari Vajpayee's cabinet had also ruled out their bid for a 26 percent stake in the domestic Indian Airlines.

Shourie said the Hinduja brothers had been kicked out of the race because of the criminal charges pending against the group in te Bofars arms deal scandal.

The minister said the Tata-Singapore Airlines venture could go ahead with their bid as long as they paid a minimum reserve price, still to be set, for the state-run international carrier.

"It is not a disaster which has happened. The important thing is to go ahead and get the job done. The Tata-Singapore Airlines is certainly a very good combination," said V.K. Mathur, an aviation expert.

Mathur, former chairman of the state-run Airports Authority of India, said postponing the privatization would be like delaying "treatment of a person suffering from terminal illness such as cancer."

Tata was the original owner of Air India and carved a name for itself based on quality of service offered.

The airline was nationalized in the 1960s, but in the 1990s faced a steady nosedive in profits.

This prompted the government to decide to sell a 60-percent stake. Forty percent would be hived off to a strategic investor, which can include a 26-percent stake to a foreign airline.

Another 20 percent would be sold to Air India employees and domestic financial institutions.

However, an aviation industry official, who did not want to be identified, said political opposition to privatization in India may force the government to set a high minimum price for -- which may put off even the last bidder.

Last year, the government decided to sell a 26-percent stake in Indian Airlines to a strategic partner and offer 25 percent to employees, the public and financial institutions.

Indian Airlines had been facing a steady erosion in market share as private operators rapidly increase their fleets.

The airline last bought aircraft in 1989 -- 18 Airbus A-320s -- and most of the other planes in its 50-aircraft fleet are 20- years-old or over.

Private airline Jet Airways has quietly jumped from three aircraft six years ago to 27 new Boeing 737-400s, 700s and 800s. It has also acquired five small ATR 72-500 aircraft and has plans to buy three more.

Aviation experts believe that unless the government manages to put both the state-run airlines on the track to privatization, Indian Airlines and Air India were bound to fade out in an increasingly competitive market.