IndiGo opts out of race to buy Air India

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The first airline which showed interest in buying debt-laden Air India was Indigo. But according to the latest update, it has opted out saying that the interest was only in the state-owned carrier’s international operations and doesn’t have the ability to turn around all of its domestic business.

President Aditya Ghosh said, “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 government’s current divestiture plans for Air India.” He added, “As we have communicated before, we do not believe we have capability to take on the task of acquiring and successfully turning around all of Air India’s airline operations.”

IndiGo had expressed it’s interest openly about acquiring Air India’s international operating arm in July, after a ministerial panel approved divestment of the airline on 28th June. This move was a surprise for experts as well it would have meant a change in its one-aircraft-type, low-cost model. To be sure, The career has acquired smaller ATRs to offer regional connections.

Rakesh Gangwal the co-promoter of IndiGo told analysts the airline was well placed to ferry longhaul international passengers in a low-cost model, fed by its domestic network. IndiGo’s proposed investment on Air India was a means to that end. Gangwal stated that “irrespective of how the Air India story plays out,” it made “fundamental economic sense for IndiGo to enter the long-haul, international market.”

According to a few reports in November said that IndiGo had started working on an alternative plan to start international operations through 50 wide-bodied airplanes.

IndiGo’s decision comes less than a week after the government issued an Expression of Interest document on the sale of a 76% stake in Air India, Air India Express and AISATS as one entity.

Analysts claimed that IndiGo’s decision is wise, though it is a big dampener for Air India. This announcement is not a good news.

Former executive director at Air India Jitender Bhargava said, “From the government’s perspective, adjusting the sale to the requirements of every airline by breaking it into pieces may not have been doable.”

CEO at Centre for Asia Pacific Aviation in India, Kapil Kaul said “Indigo needs to remain focused on executing their business plan which will see very aggressive expansion in domestic and international. Air India, though a very good opportunity, would have been too complex and risky for IndiGo.”

Government officials involved in the divestment said IndiGo’s withdrawal would not affect the plan to sell stake in Air India. “It does not mean anything as IndiGo are too big for their boots.

Acquisition by them would have led to a monopolistic situation in the domestic market and also they operate a narrow-body fleet, which is not ideal for international operations. Also, they wanted only international operations, which is not doable,” said a senior government official who did not want to be identified. With IndiGo opting out, an unidentified international carrier, the Tata Group and Jet Airways are still in the race for Air India.