Public sector carriers Air-India and Indian Airlines would not offload more than 20 per cent of their equity in their proposed initial public offer slated to be announced within this fiscal.
"Not more than 20 per cent of equity will be offered in these two carriers. Their public sector status will be maintained," Civil Aviation Minister Praful Patel said at the Economic Editors Conference in New Delhi.
The two airlines would go to the capital market 'in the first quarter of 2006,' he said, adding that the employees would also be given stock options.
Patel said the two airlines 'need more financial muscle and more equity. We cannot just do with the equity injected by the government if they have to face heightened competition.'
In a wide-ranging address, he said AI and IA would also require greater synergy in their operations while referring to the recent mergers in the global aviation industry, like KLM being taken over by Air France.
"Even in the domestic aviation scene, consolidation talks are on among some airlines," he said while stressing on the need for the public sector carriers to synergise their operations.
The minister said AI's fleet acquisition plan for 50 Boeing aircraft and another 18 for its subsidiary AI Express would get the final nod of the Cabinet Commitee on Economic Affairs by the middle of December and a note for the CCEA was already in circulation.
Observing that IA's plan for purchase of 43 Airbus aircraft had already been cleared, Patel said the first of the A-319s would arrive this month-end followed two each in December, January and February.
He said the Airports Authority of India would also raise about Rs 6,000 crore (Rs 60 billion) and undertake upgrade and modernisation of 35 non-metro airports across the country "in one go".
The work on these airports would begin by 2006-07 and end by 2008-09, Patel said, adding discussions were on with the Planning Commission about the ways in which resources could be mobilised for this purpose.
On the modernisation of Delhi and Mumbai airports, Patel said Australian consultant Airplan, the global technical advisor on the matter, was likely to submit its report on the technical bids by the private bidders on Monday.
Following this, the report would be vetted by the civil aviation ministry and sent to the inter-ministerial group of secretaries and officials of concerned departments and then by the empowered group of ministers for the final evaluation by the first week of December.
"We hope to award the contracts to the joint ventures by December end," the minister said.
Referring to the Left's concerns about "privatisation" of Delhi and Mumbai airports, which earn almost half the revenue of the AAI per year, Patel said the model for these two airports to be handed over to AAI-private consortia JVs was based on the revenue-sharing basis.
"Only those (parties) will be accommodated who will either match or give more revenue to AAI than it is earning from these two airports today," he said and also allayed Left and trade unions' apprehensions about job losses in AAI.
He said, though, there has been no final decision on the process to be adopted for Kolkata or Chennai airports, work on these two airports would begin next year.
Patel said the equipments relating to navigation and air traffic management as well as instrument landing systems would be put in place at all these airports, where the city-side would also be developed either by the AAI itself or through public-private partnership.
Referring to the highly-liberalised new air traffic agreements with the United States, the United Kingdom and several other countries, Patel said there had been a "radical shift" in the policy in this regard and more bilaterals will be signed during this fiscal.
Private airlines were also allowed to operate abroad, though due consideration was being given to the operational plans to AI and IA while allotting entitlements to their private competitors, he said.
State governments should also come forward to tie up with state-owned carriers like IA or Alliance Air to improve intra-state connectivity like the North Eastern Council. He said talks were on in this regard with Maharashtra, Karnataka and Jharkhand.
Observing that air traffic had registered a 25 per cent growth last year and was expected to grow by 25-30 per cent this fiscal, the minister said if this boom was to be sustained, another few hundred aircraft would be required and consequently the infrastructure has to be in place.
"In five years, the sector will require $30 million worth of investments and in ten years, $50 billion," he said, equating the aviation sector with IT, BPO and telecom in terms of investment and job potential.
At present, 12 scheduled airlines including new ones were operating in the country and two more, InterGlobe and Indus Airways, were awaiting their operating permits from the Directorate General of Civil Aviation to launch operations. He said conscious efforts were being made to shift more and more international and domestic carriers from Delhi and Mumbai to achieve an "even regional spread" in aviation.