New Delhi: IndiGo, India’s biggest budget airline, has expressed unsolicited interest in Air India Ltd, becoming the first suitor to toss its hat in the ring after the federal cabinet approved a proposal to privatise the state-owned airline.
IndiGo, operated by InterGlobe Aviation Ltd, sent in its interest late Wednesday night, minister of state for civil aviation Jayant Sinha said. It came within hours of the cabinet approving the privatisation of Air India and five of its subsidiaries.
“The first formal expression of interest has been received from IndiGo," Sinha said, adding that other airlines, including some international ones, have also shown interest in Air India. He didn’t name any of the others, which have requested that their names be kept confidential.
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According to aviation secretary R.N. Choubey, IndiGo said it was expressing its interest in Air India based on the cabinet decision to privatise the airline.
Together with the letter, IndiGo included a small presentation showcasing its market, network and fleet expansion plans, said a government official, who has seen the letter and declined to be named.
IndiGo wants to take over the international operations of Air India and its affiliate Air India Express, but will also be open to buy its domestic operations, the airline said in its letter, this person said.
Aviation secretary Choubey said IndiGo will have to apply when the tenders are floated.
Asked if anti-trust issues could arise should a transaction take place, he replied: “Monopoly itself is not a issue but it is the abuse of market dominance. That falls under the purview of CCI (Competition Commission of India)."
IndiGo controls about 40% of the domestic market and about 3% of the international market, with 136 planes. Air India has the largest domestic and long-haul fleet of 140 planes in the country and flies to nearly 41 international and 72 domestic destinations. It has a domestic market share of 14% and a share of 17% on international routes out of India.
An IndiGo official who declined to be named said it had sent the letter to the ministry. The airline’s spokesman said the company was in a silent period, without saying why, and hence could not comment.
The government official quoted above said the aviation ministry had been surprised by IndiGo’s letter.
Spokespersons for Tata Sons Ltd, which is a partner in two airline ventures, SpiceJet Ltd, Go Airlines (India) Ltd, Jet Airways India Ltd and Qatar Airways Ltd, which has previously expressed interest in entering the Indian market, declined to comment on potential interest in Air India.
The ministry said a working group of ministers was being created which will submit its final recommendations.
The group under finance minister Arun Jaitley will decide on the treatment of unsustainable debt of Air India, hiving off certain assets to a shell company, spinning off and selling stakes in three profit-making subsidiaries, the quantum of disinvestment, and the eligibility criteria for the bidders, the ministry said in a statement.
Aviation ministry Ashok Gajapathi Raju said on Thursday that the airline’s name has a sentimental value and the ministry would look at how to preserve it.
“Air India is attractive to anyone who has a serious and long-term interest in the fast-growing Indian aviation market, subject to the Indian government executing the divestment deal in a thorough and meticulous manner and after giving clear decisions on Air India employees, Air India debt and equity position and bilaterals," said Amrit Pandurangi, formerly the head of Deloitte Touche Tohmatsu India LLP’s aviation practice.
InterGlobe Aviation’s shares fell 2.05% to Rs1,237 on Thursday, while the BSE Sensex rose 0.08% to close at 30,857.52 points.