InterGlobe confirms interest in Virgin Australia sale

Our Bureau New Delhi | Updated on May 15, 2020 Published on May 15, 2020

IndiGo not part of bidding process, say sources

InterGlobe Enterprises (IGE), which runs low-cost airline IndiGo, confirmed on Friday that it has signed an agreement to participate in the sale process of the bankrupt Virgin Australia (VA). IGE is an Indian conglomerate which has interests in aviation and hospitality, among other segments.

In a statement confirming its participation, IGE said it is bound by the confidentiality requirements of the agreement and is unable to divulge anything further at this stage.

VA went into liquidation with a debt of over $5 billion last month. Sources indicated that InterGlobe Aviation, which manages IndiGo, is not part of the expression of interest (EoI) by IGE. Rahul Bhatia, the owner of IGE, is one of the co-promoters of IndiGo.

Friday is the last date for putting in an EoI for VA and the short-list of bidders is expected to be finalised by June.

Bhatia’s readiness to pump funds into another airline is seen to reflect his bullishness on the prospects of the aviation industry. A section of employees in IndiGo sees the move as meaning their jobs are relatively safe.

Little synergy

The decision not to involve IndiGo in the bidding process for VA makes good sense, said industry experts.

For starters, VA is not a no-frills airline, making its customer profile different from that of IndiGo, which is an out and out low-cost airline.

“Virgin Australia moved from a low-cost airline to a full-service airline while IndiGo has continuously maintained that it is comfortable being a low-cost airline; hence there is a definite mismatch there,” said an industry watcher who declined to be identified. “Being a full-service airline, the profile of customers (in terms of business, value-added service needs, loyalty programmes etc.) will be different and hence not much synergy can be extracted.”

Further, IndiGo and VA have vastly different fleet mixes. The VA website shows it has a fleet of about 116 aircraft, a majority of which are Boeing — it has 75 Boeing 737-800 and Boeing 737-700 aircraft. In comparison, IndiGo’s fleet comprises Airbus A-320s and the smaller ATR variety of aircraft.

With little synergies, it would not have made sense for IndiGo to be part of the bid process for VA, said the industry watcher.

Published on May 15, 2020

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