Indigo eyes Air India's International fleet, expresses interest to buy out the operations

Leading domestic carrier IndiGo has expressed its interest to buy out Air India's flight operations, particularly international services, as the airline looks to spread its wings overseas.

Leading domestic carrier IndiGo has expressed its interest to buy out Air India's flight operations, particularly international services, as the airline looks to spread its wings overseas.

The letter from IndiGo President Aditya Ghosh was sent to Minister of Civil Aviation Gajapathi Raju soon after the Cabinet yesterday gave its in-principle approval for the consideration of Air India's disinvestment.

"Kindly treat this letter as our expression of interest in acquiring the international airline operations of Air India and Air India Express. Alternatively, we are equally interested in acquiring all of the airline operations of Air India and Air India Express," Ghosh said in the letter.

IndiGo is the market leader in the domestic aviation sector with a share of little over 41 per cent.

In a separate letter to IndiGo staff, Ghosh said its interest in Air India was primarily in its international operations.

"Without our domestic feed network, it just does not make sense to embark on this journey and if we do go down this path, it would require significant restructuring of the acquired operations.

"In that journey, we are not going to take on debts and liabilities that could not be supported by the new restructured operations," he said.

Referring to IndiGo's interest in Air India, Ghosh also asserted that it would not embark on the journey if it was not profitable and did not add value to the employees, customers and shareholders.

The low-cost carrier currently services seven international destinations, most of which are in the Middle- East. These include Sharjah, Muscat, Dubai, Doha, apart from Singapore, Bangkok and Kathmandu.

The national carrier has a much wider global presence with its reach across destinations in Europe, Asia, Australia, the US and the Middle-East.

"IndiGo has written a letter with an unsolicited expression of interest (EOI) in the divestment procedure of Air India," Civil Aviation Secretary R N Choubey said earlier in the day.

"Many other private players, both domestic and international, have approached us. The first formal expression of interest is from IndiGo," Minister of State for Civil Aviation Jayant Sinha told the media here.

Top officials said the government's decision to look at ways to privatise the airline was in line with its efforts in the past two years for a turnaround of Air India.

The Air India has a debt of Rs 52,000 crore and is surviving on a bailout package of Rs 30,000 crore approved in 2012.

"The present management has been able to bring about a turnaround in the airline. From Rs 105 crore operating profit in 2016, Air India is now at an unaudited operational profit of Rs 220 crore," Choubey said.

He said its losses were down from Rs 3,900 crore to Rs 3,300 crore.

"Now there is an airline worth looking at and it is a cash positive airline operationally. Once we handle the issue of debt it is a valuable airline," Choubey said.

If IndiGo has approached the government "post-haste", it means the market sees it as an asset of tremendous value, Choubey added.

As the group of ministers prepares Air India's future plans inputs from various stakeholders, including former civil aviation ministers, would be sought.

The Cabinet has decided to form an Air India-specific Alternative Mechanism headed by the finance minister and including the civil aviation minister and others.

It will look into five terms of references which include the treatment of unsustainable debts of Air India, hiving off certain assets to a shell company and de-merger and strategic disinvestment of three profit-making subsidiaries.

It will also decide on the quantum of disinvestment in Air India and the universe of bidders.

Meanwhile, Ghosh, in his letter to the minister, emphasised that over time government policies in the country have "allowed disproportionate access to airlines of some of the city states in the Middle East and South East Asia" resulting massive hubs being created by these airlines at the expense of India.