Air India

(The Economist, July 8th-14th, 2017, “Down the Aisle”)

Last week, Indian authorities announced an “in principle” cabinet agreement to privatize Air India.  On June 30th, a private Indian airline – IndiGo – indicated a desire to bid for Air India.  This is not the first time the Indian government has considered selling Air India.  In 2000, it was put up for sale, but ultimately reprieved.  According to The Economist, the Indian government “has talked for years of privatising the over 200 state-owned companies on its books, but no sale has taken place.”


(The Economist, August 5th-11th, 2017, “French reforms: Keep you nerve”)
(The Economist, August 5th-11th, 2017, “Privatisation in France: National Treasures”)

The French state has investments in nearly 1,800 firms, worth almost 100 billion Euros.  The state-owned sector in France employs 800,000 people, and the number of firms in which the state has a majority stake was been rising since roughly 2006.  France’s public holdings are mainly managed by the Agence des participations de l’Etat (APE), Bpifrance (a public investment fund), and the Caisse des Depots et Consignations (CDC), a state investment bank.  Notable companies with significant French state investment include EDF, Safran, Thales, Airbus, Renault, and Orange.

During his presidential run, Emmanuel Macron promised to raise 10bn Euros from the sale of some of the French state’s corporate holdings (to pay for a new fund to help other companies invest in innovation).  On July 27th, he pledged to nationalize France’s biggest shipyard at Saint-Naizaire, rather than see it sold to Fincantieri, an Italian shipbuilder.  The government insists that the nationalisation will be temporary, and a deadline of September 27th has been set to reach an agreement between the French government and Italian shipbuilder.  Fincantieri’s industrial partner is a Chinese cruise-ship builder.

French government ownership has not always been associated with business success.  Areva, a nuclear power company 92% owned by the French state, collapsed.  EDF, 83.4% owned by the French state, has seen the price of its shares go from 86 Euros a share in 2007 to under 9 Euros.

In recent years, the French state has quietly sold off stakes in various regional airports, including Lyon, Nice and Toulouse.  Groupe ADP, which owns the main airports in Paris (at Charles de Gaulle and Orly), remains 50.6% state-owned, but The Economist sees the sale of that stake (worth around 7 billion Euros) as “all but inevitable.”


(The Economist, August 12th-18th, 2017, “The business of airports: Losing altitude”)

Before the 1980s, most airport income came from landing fees and passenger-handling charges.  By 2015, around 40% of airport income came from “non-aeronautical” revenue – shops, parking, car rental, etc.  There are signs, however, that such income in mature aviation markets may be peaking.

Britain led the way with airport privatization in the 1980s.  Canada leased its major airports to private companies in 1994.  Emmanuel Macron in France is considering some airport sales.  According to the Economist, Latin American countries are following closely behind.