Logistics

IndiGo makes formal offer to buy Air India’s international operations

K Giriprakash Bengaluru | Updated on January 12, 2018 Published on June 29, 2017

AI_572751f

Air India brings to the table a multitude of connections, hangars, slots, and real estate

The first official “interest” in acquiring national carrier Air India has come from the most unexpected source, the low-cost IndiGo.

On the face of it, IndiGo and Air India are more like chalk and cheese. The former is an ultra low-cost airline while Air India, called the Maharaja, operates like one.

In a notice to the BSE, IndiGo’s president Aditya Ghosh on Wednesday said he has written to the Civil Aviation Ministry expressing interest in buying the airline.

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

According to the Ministry, this was the first “unsolicited” formal offer for Air India. There have been a few informal offers from both domestic and international airlines too, the Ministry said.

An analyst with an international consultancy firm who did not wish to be quoted said Air India is a very valuable company in spite of all the criticism it faces.

“Air India acquisition can help an airline become a very strong player. The network it brings to the table with a multitude of connections, hangars, slots, real estate... can play a key role for the airline to get a huge market share in the domestic as well as the international markets,” the analyst said.

Buying the international operations would mean getting the Star Alliance tag on a platter and prime slots at airports such as Heathrow — and the Boeing Dreamliner fleet as well. Air India Express is another good buy because it is profitable too.

Another airline analyst, Devesh Aggarwal, said there is very little synergy between the IndiGo and Air India. Given the ₹52,000-croremountain of debt weighing it down, the government could sell off the three profitable subsidiaries of the airline which will considerably reduce the total debt, the analyst added.

For IndiGo, which commands a 41 per cent market share, acquiring Air India will increase its share to over 50 per cent. But the analyst said that it remains to be seen how the airline will raise funds to make this acquisition as the carrier has placed huge orders for aircraft, including 50 ATRs worth $1.3 billion recently.

Published on June 29, 2017
null
This article is closed for comments.
Please Email the Editor