IndiGo was the only airline that had shown interest in buying into Air India even before the government formally invited EoIs from airlines and other interested parties in writing.
In a move that could put a spanner in Air India’s divestment process even before it gathers steam, the country’s largest carrier by fleet, market capitalisation and market share, IndiGo on Thursday indicated that it may not bid for the national carrier,on the basis of the preliminary information memorandum, spelling details of the process brought out by the government in March, in its current form. IndiGo was the only airline that had shown interest in buying into Air India even before the government formally invited EoIs from airlines and other interested parties in writing. “From day one, IndiGo has expressed its interest primarily in the acquisition of Air India’s international operations and Air India Express. However that option is not available under the current divestiture plans for Air India. Also, as we have communicated before, we do not believe that we have the capability to take on the task of acquiring and successfully turning around all of Air India’s airline operations,” IndiGo’s president and whole-time director Aditya Ghosh told investors regarding IndiGo’s involvement in the upcoming divestiture of Air India, the airline said in a late evening statement. The market seemed to have cheered the move by the carrier as its stock was at a lifetime high and went up by 4.3 %, closing at Rs 1,448.65 on Thursday, adding Rs 2,312 crore to the market cap of the company that touched Rs 55,687 crore.
IndiGo now becomes the second carrier to have officially stated that it might not bid for Air India; previously budget carrier SpiceJet’s promoter Ajay Singh in January said that the airline is too small to bid for Air India. Top sources at Air India had indicated to FE that IndiGo might join hands with Middle Eastern carrier Qatar Airways to bid for Air India, IndiGo however denied this later. This leaves the country’s second largest airline, Naresh Goyal-promoted Jet Airways, and Tata Singapore Airlines’ JV, Vistara, in the fray to bid for Air India. Jet Airways has financially been one of the weakest performing airlines in India and Vistara has indicated its interest in looking at Air India. There were reports that Jet might team up with Air France-KLM and US carrier Delta Airlines but a consecutive three-year profitability clause in the PIM excludes Air France from the deal and Jet might have to find other partners. Air France however never commented on those reports. The government, pursuing its commitment to privatise loss-making Air India, in its PIM in March offered its 76% share in the national carrier along with 100% holding in budget arm Air India Express, and also 50 % in its joint venture with Singapore Airport Terminal Services, AISATS. The government has kind of sweetened the deal by putting up Air India’s nearly Rs 33,000 crore debt into a separate SPV along with some prime land assets of Air India that the government aims to sell off and repay the debt slowly. IndiGo’s interest lay primarily in the international operations of Air India as the acquisition of these would have made it a global airline to reckon with in one stroke, with premium slots at all marquee airports across the globe and envious bilateral rights that Air India has enjoyed by virtue of it being a national carrier. However, experts say that if Air India, in its present form, as offered by the government is picked up by any airline, it will need huge capital investment by the buyer, with a transaction value to $6-8 billion as entry price and then at least similar capital to turn the airline around.