IndiGo pulls out of race for Air India


NEW DELHI, APRIL 6: Low-cost carrier IndiGo has ruled out its participation in the disinvestment of Air India.
The airline said in a statement on Thursday that it was primarily interested in acquiring Air India’s international operations but that option was not available after the Centre released the expression of interest document last week for the stake sale in the national carrier.
The Government has proposed to sell 76% of Air India along with low-fare subsidiary Air India Express and a 50% stake in AISATS, a ground-handling joint venture with Singapore Airport Terminal Services (SATS), as a single entity.
“From day one, IndiGo has expressed its interest primarily in the acquisition of Air India’s international operations and Air India Express.
‘Option not available’
“However, that option is not available under the Government’s current divestiture plans for Air India,” the airline quoted its president and whole time director Aditya Ghosh in a statement.
Ghosh added, “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.”
Last June, following the Cabinet’s in-principle approval for the disinvesment of Air India, IndiGo had written to the Government expressing its interest to buy Air India, particularly its international services.
However, it had then told the Ministry of Civil Aviation that if the option of buying only the international arm was not available it would be equally interested in all of the airline operations of Air India and Air India Express.
IndiGo has the largest domestic market share and had cornered a 39.9% share in February. According to Kapil Kaul, CEO of aviation consulting firm CAPA, IndiGo is the only Indian carrier which qualified to bid as a single entity under the eligibility criteria, while other carriers will have to form a consortium to bid for Air India. An eligible bidder must have a minimum net worth of ?5,000 crore and net profit after tax in at least 3 of the immediately preceding 5 financial years.
“It is a very wise decision and in the interest of their shareholders… Air India, though a very good opportunity, would have been too complex and very risky for IndiGo,” said Kaul.
“I don’t believe IndiGo would have $ 6 billion (to buy) and another $ 10 billion (to modernize and transform) lying spare in their wallet to buy Air India considering that we are in a bumpy phase with jet fuel prices peaking to its 5-year high. It’s not worth the risk as IndiGo will need the money it has saved for its own fleet expansion and network growth since they have now commenced with ATR operations and soon the A321LR. The Government needs a bidder interested in the wider potential of the carrier and not just in breaking Air India into parts for its own interests,” said Mark D Martin, Founder and CEO, Martin Consulting. (Courtesy: The Hindu)