1. IndiGo checks-in with formal offer to buy Air India, even as Tata mulls acquiring the Maharaja

IndiGo checks-in with formal offer to buy Air India, even as Tata mulls acquiring the Maharaja

While the news report of the Tata Group considering acquiring the debt-ridden national carrier Air India spread like a wildfire recently, rival private airline IndiGo has reportedly already approached the government for buying a stake in the beleaguered state-run behemoth.

By: | Updated: June 29, 2017 6:00 PM
Civil Aviation Secretary Rajiv Nayan Choubey says IndiGo can bid for buying Air India once formal bids open. (Image: Reuters)

While the news report of the Tata Group considering acquiring the debt-ridden national carrier Air India spread like wildfire recently, rival private airline with the largest market share — IndiGo — has already made a formal unsolicited approach with the government for buying a stake in the beleaguered state-run behemoth which has seen its business shrink over the years.

Minister of State for Civil Aviation Jayant Sinha said on Thursday that IndiGo has expressed interest in the strategic disinvestment process to buy Air India stake, a day after the Union Cabinet gave an in-principle approval for disinvestment of Air India, paving the way for privatisation of the troubled national carrier, which turned into a taxpayer money guzzling machine ridden with inefficiencies and mismanagement.

Civil aviation secretary Rajiv Nayan Choubey said that Interglobe Aviation, the company which operates IndiGo, was the first one to formally write to the government showing its interest in buying Air India, adding that the company can bid for the airline once formal bids open. Further, Jayant Sinha said that many other private players, both domestic and international, have approached the government, adding, “But those were informal talks. IndiGo’s was the only formal EOI.”

IndiGo has reportedly said it would prefer to buy the international operations and the low-cost domestic operations of Air India, but has also said that if that is not possible, it would like to buy the entire operation including domestic.

Meanwhile, another low-cost carrier SpiceJet, which was recently in news for praise by the US President Donald Trump for placing a huge $22 billion order for buying 100 aircraft from Boeing, is also reportedly in the race to buy Air India, BTVi said citing unidentified sources. Another agency report cited aviation ministry officials saying they haven’t received any interest from SpiceJet yet.

Yesterday, Finance Minister Arun Jaitley said after the Cabinet meeting that the government will form a Group of Ministers to look into the ways to divest its equity stake in Air India, adding that the GoM will also decide on the modalities of the proposed disinvestment, including the quantum of the stake to be diluted and ways to deal with the carrier’s existing debt. The government has accepted the NITI Aayog suggestions on privatisation of Air India, he said.

Air India’s market share in domestic market has fallen to 14% in 10 years from 35% a decade ago, placing it third in the national ranking, behind Indigo, which commands about 40% of Indian skies, and Jet Airways, which has about 16% of the share. Air India also flies overseas, and commands 17% of the international traffic from and into India.

Air India, under intense competition from leaner, more efficient and often-cheaper private airlines, is reeling under a debt of over Rs 52,000 crore, with about Rs 28,000 crore in working capital debt, and about Rs 4,000 crore in interest burden alone. It has not turned profit in 10 years, since at least the year 2007.

Air India has guzzled up taxpayer money over and over again but to no effect. The carrier has received bailout packages worth about Rs 24,000 crore out of a total Rs 30,000 crore approved, but has failed to revive its fortunes amid private airlines continuously gaining market share.

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    Balajirap k
    Jun 29, 2017 at 3:31 pm
    Business should be run like a business and not like charity. Thats precisely a reason for this carrier being ill. High ries low productivity, lower occupancy, free flights to bureaucrats, polticians, poor service of the air crew etc and more are the few reasons for their status now. I am sure the tatas will revive it to better. Then let the free bees be sacked and only a discoumted tickets allowed to so called b,crats, polticians etc. All the best to tatas.
    Reply
    1. D
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