India’s plan to sell a majority stake in debt-laden Air India received a setback as budget carrier IndiGo, the first to show interest, said it can’t buy the debt-laden national carrier under the plan worked out by the government.
“We do not believe that we have the capability to take on the task of acquiring and successfully turn around all of Air India’s operations,” Aditya Ghosh, president of InterGlobe Aviation Ltd., parent of IndiGo, said in a statement today.
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.Aditya Ghosh, President, InterGlobe Aviation
The government said it will sell 76 percent in the airline, along with 100 percent in its low-cost arm Air India Express and 50 percent in the ground handling unit. A potential buyer will have to take on more than half of the Rs 54,000 crore debt. The government plans to retain the remaining 24 percent in the airline.
Indigo’s decision is in the best interest of their shareholders as acquiring and integrating Air India’s complex operation would be risky for the carrier, Kapil Kaul, Director of CAPA South Asia told BloombergQuint in an interaction. “I think it would be a long term strategic strength for Indigo to not pursue something as dangerous and complex as Air India in terms of acquiring.”
Other Potential Concerns
- Air India and Air India Express combination doesn’t suit many airlines.
- Bidders wanted to bid separately for domestic and international routes.
- A potential buyer will have to take over debt of over Rs 33,000 crore.
- Debt will not have any sovereign guarantee.
- The airline has 20,000 permanent and temporary employees.
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