IndiGo expresses interest in buying a stake in debt-laden Air India

Air India

Day after the Union Cabinet gave in-principle approval for Air India divestment, budget carrier IndiGo has expressed interest in purchasing a stake in the debt-laden national airline.

“As the Indian Government embarks on the journey of privatizing Air India … kindly treat this letter as  our expression of interest in acquiring the international airline operations of Air India and Air India Express,” IndiGo President Aditya Ghosh wrote to the Ministry of Civil Aviation.

“It’s time for India to take back its fair share of international traffic,” he wrote indicating IndiGo’s ambitions to grab a pie of the India’s international air traffic.

Here’s the copy of the Ghosh’s letter to the Civil Aviation Ministry

Elaborating on the divestment plans, Finance Minister Arun Jaitley on Wednesday had said government has decided to set up a committee to explore various options including strategic divestment of the loss-making airline and its five subsidiaries. Finance Minister Arun Jaitley will head the inter-ministerial panel. The decision was based on the recommendations of Niti Aayog.

The committee will consider the quantum of disinvestment to be made the “universe of bidders”, according to a government statement.

According to media reports, Tata Sons officials led by Chairman N Chandrasekaran are known to have already met up with top officials in the aviation ministry to express their interest in buying the airline.

Tata Sons has stakes in Air Vistara and AirAsia India.

The committee will also study and suggest ways to treat the unsustainable debt of Air India; hiving off certain assets to a shell company and demerger and strategic divestment of the airline’s profit-making subsidiaries.

Air India Transport Services, Hotel Corporation of India, Air India Charters, Air India Engineering Services and Airlines Allied Services are the five subsidiaries of Air India.

The airline, surviving on a Rs 30,231-crore government bailout package, has accumulated losses of around Rs 52,000 crore and as much debt. The package, approved by the previous government in 2012, called for staggered equity infusion over nine years.

It has so far received Rs 23,993 crore under the package.

The airline reported an operating profit of Rs 105 crore in 2015-16 though this was contested by Comptroller and Auditor General which said it was actually an operating loss of Rs 321 crore. The national carrier hasn’t made a net profit in at least a decade.

Air India has a 14 percent market share in the domestic market and 17 percent share of the overseas traffic flying to and from India.

Clearly, indicating his ministry’s views on the issue, Jaitley had recently earlier said the government should have ideally exited the airline 15 years ago and that he saw no reason why the private sector couldn’t be allowed to handle the remaining passengers in the domestic market when it was already managing the 86 percent.