Ownership and control defines aviation. Ownership is quantitative, assessing if shareholder composition meets thresholds about locality or type of investor. Control is more qualitative, abstract and subject to manipulation. Yet the industry and its government regulators have typically focused only on the ownership component.
Ignorance of control could hurt India and Malaysia as they sell their respective flag carriers Air India and Malaysia Airlines (MAS). The sales are gaining momentum. There are four short-listed bidders for MAS while the Indian government will re-start the process for Air India, this time offering a larger stake and perhaps even 100%.
While the governments may offload ownership of their airlines, there is concern that retaining influence would undermine the new owners.
Malaysia has not decided if it will permit a new shareholder to take majority ownership of MAS from sovereign wealth fund Khazanah. But the government does want the ability to meddle. Malaysian Minister of Economic Affairs Datuk Seri Mohamed Azmin Ali told parliament, “The government will ensure that through Khazanah, we will still have (an) important stake and influence in the new structure.”
MAS over the years has attempted a number of restructurings under various management teams, but has been thwarted by government interference, industry observers generally agree about. Meddling can be significant, such as preventing workforce reduction. It can also be petty, such as how to paint an aircraft or what employee uniforms should look like. Those may not bear cost disadvantages, but can demoralise staff and consume limited management bandwidth.
The Indian government is expected to re-start the sale process for Air India by launching an expression of interest as early as November, according to the Telegraph.
Air India still carries high debt, operational problems and a bloated workforce. What will be different this time is still to be finalised, but a government source told the Telegraph of an option: “One of them is offering 100 per cent stake for the buyers so that they do not worry about any interference by the government at a later date.”
The government did not receive any bids from last year’s offer of 76% of Air India, largely attributed to fears the government would have disproportionate influence by retaining 24%.
Like most countries, India and Malaysia require airlines to be locally owned. There are greater prospects for Air India to have a local majority shareholder, avoiding thorny questions about ownership laws.
30/10/19 Will Horton/Forbes
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Ignorance of control could hurt India and Malaysia as they sell their respective flag carriers Air India and Malaysia Airlines (MAS). The sales are gaining momentum. There are four short-listed bidders for MAS while the Indian government will re-start the process for Air India, this time offering a larger stake and perhaps even 100%.
While the governments may offload ownership of their airlines, there is concern that retaining influence would undermine the new owners.
Malaysia has not decided if it will permit a new shareholder to take majority ownership of MAS from sovereign wealth fund Khazanah. But the government does want the ability to meddle. Malaysian Minister of Economic Affairs Datuk Seri Mohamed Azmin Ali told parliament, “The government will ensure that through Khazanah, we will still have (an) important stake and influence in the new structure.”
MAS over the years has attempted a number of restructurings under various management teams, but has been thwarted by government interference, industry observers generally agree about. Meddling can be significant, such as preventing workforce reduction. It can also be petty, such as how to paint an aircraft or what employee uniforms should look like. Those may not bear cost disadvantages, but can demoralise staff and consume limited management bandwidth.
The Indian government is expected to re-start the sale process for Air India by launching an expression of interest as early as November, according to the Telegraph.
Air India still carries high debt, operational problems and a bloated workforce. What will be different this time is still to be finalised, but a government source told the Telegraph of an option: “One of them is offering 100 per cent stake for the buyers so that they do not worry about any interference by the government at a later date.”
The government did not receive any bids from last year’s offer of 76% of Air India, largely attributed to fears the government would have disproportionate influence by retaining 24%.
Like most countries, India and Malaysia require airlines to be locally owned. There are greater prospects for Air India to have a local majority shareholder, avoiding thorny questions about ownership laws.
30/10/19 Will Horton/Forbes
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