More details of the tender for Georgian Airlines, which still appear to require heavy investment by investor for minority position

Published: 7/28/1999

The Georgian Ministry of State Property management has announced further details of its investment tender for privatisation of 49% of Georgian Airlines (www.concise.org 21 May 1999). The tender process defined under Presidential Decree 50 states that the purpose of the tender is to: The selection of investors and partners with the purpose of material-technical rehabilitation of the air flagship of Georgia - "Georgian Airways", its long-term development to ensure maximum and effective operation of Georgian aviation market; recovery of financial obligations of "Georgian Airways" in a short period of time. The nominal value of the stock of the airline is set as $2.3 million and at present is 100% owned by the Georgian state. Based at Tiblisi International Airport the airline currently owns a fleet of 21 aircraft according to the proposal: ·five TU-154 ·five TU-134 ·eleven YAK- 40 The aircraft are supported by a workforce of 430 people of whom 99 are pilots with 185 engineers and technicians employed in the company's maintenance and repair facility The airline has the rights for ten route licences from Tiblisi and has, as was earlier reported, $3 million of debt which will be assumed by the successful tenderer. For those interested in the tender the conditions basically cover the following areas: -purchase of 49% of the company for initial payments of $250,000 followed by two further payments of $1.27 m -provision of two 100 seat aircraft meeting European airport and airspace standards -training of airline staff -provision of an internationally compatible booking and reservation system -introduction of modern management and marketing systems -membership of IATA within 6 months of contract -maintenance of 60% of the Georgian workforce for three year -more ambiguously, the renewal and expansion of the Georgia Airlines fleet For the party that wins the tender the following criteria will be met: 1.Entirely meets the tender conditions 2.Executes maximum investment in the periods stated in tender conditions (approximately no less than $12 m) 3.Makes payment of the amount announced for procurement of shares. The agreement will stand for 10 years and failure to comply with the terms will initially result in penalties being paid and in the second case default of the contract by the Georgian government. The tender is open from July to September 1999 and is being administered by the Georgian Ministry of State Property Management in Tblisi. The role of the government in the relationship is not outlined in the proposal as far as Concise can ascertain .We therefore assume that they retain their 51% majority stake and since there is not explicit contrary statement in the tender documentation, the right of veto of their minority partner.

Article ID: 706