InterGlobe Aviation, which runs the low-cost carrier IndiGo, has expressed an interest in acquiring the loss-making Air India.
InterGlobe Aviation, which runs the low-cost carrier IndiGo, has expressed an interest in acquiring the loss-making Air India. Civil aviation secretary RN Choubey said on Thursday that the company has written a letter to the ministry. The Cabinet had on Thursday has given an in-principle nod to the disinvestment of Air India. The final modalities of the divestment, including the quantum of stake sale, would be formalised by a group of ministers headed by finance minister Arun Jaitley.
Confirming the development, IndiGo said in a statement, “As the Indian government embarks on the journey of privatising Air India, and given IndiGo’s track record of creating a consistently profitable airline with a strong balance sheet, kindly treat this letter as our expression of interest in acquiring the international operations of Air India and Air India Express. Alternatively, we are equally interested in acquiring all of the airlines operations of Air India and Air India Express.”
Air India has 12,000 employees and 118 aircraft, all on lease. IndiGo currently commands a 40% share of the Indian market, the world’s third-largest and fastest growing. Analysts forecast domestic passenger volumes will grow at a compounded 13% between 2016 and 2026, ahead of the 11.6% clocked between 2006 and 2016. In 2016, passenger volumes hit 100 million, ahead of Japan’s 97 million but way below that in China and the US.
Penetration — defined by the number of annual seats per capita — remains relatively poor even compared with developing economies such as Brazil or Turkey. IndiGo’s profit in 2016-17 fell 16.46% to Rs 1,662 crore but the carrier is expected to generate free cash flows of upwards of Rs 3,000 crore in the current year. The airline’s revenues are estimated at a little under Rs 25,000 crore, on the back of an increase in the average ticket price. Profits are tipped to be around Rs 2,500 crore.