Last year, when the Government of India decided that they had to go for Air India privatisation, IndiGo moved pretty fast, expressing their interest in acquiring the international operations of Air India. However, there was a lot of small progress from the government from July 2017 through March 2018 about how the deal would work, so they eventually only got around to releasing the document on the sale of Air India late last month.

IndiGo wanted to use Air India as the baseline of their long-haul international operations. So, they had asked to buy out Air India International Operations and Air India Express, leaving behind the domestic operations to someone else. Important to note, since IndiGo is anyways at 40% market share and buying AI domestic operations would have triggered a clearance from the Competition Commission of India. Otherwise AI runs an all Airbus and ATR fleet domestically, which would have been a perfect fit for IndiGo.

As swiftly came the expression of interest, also came the denial of interest once the EoI document was put out in the public domain. Per the Government, they would sell Air India (76%) along with Air India Express (100%) and the ground handling company AISats(50%). So, a complete unit in one go. They did not want to go through the trouble of carving things out really, although I feel that would have given the bidders and the government the best value out of it.

So, IndiGo last night issued a statement withdrawing from the race to buy Air India. As per Aditya Ghosh, the President & Whole Time Director,

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. Also, as we have communicated before, we do not believe that we have the capability to take on the task of acquiring and successfully turning around all of Air India’s airline operations.

But that, does not mean IndiGo will not work on long-haul operations. They’ve maintained a position that they will fly long-haul, with or without Air India’s international operations. It is heard that they are exploring plane options right now and may place an order for 50 A330neos as early as June 2018.

On the other hand, that still leaves Tata Sons in the bidding, and also Vistara, if Singapore Airlines supports the view. People also think that Jet Airways will make a bid. Let’s see if they do.

Bottomline

There seems to be something like sanity in the market. Air India is a white elephant and whosoever will take it over will have a long road to making it profitable. What doesn’t help is that they need to list it within 3 years of taking over the airline so that a public valuation is available. I’m glad that IndiGo washed their hands of it early in the game.

Who do you think will acquire Air India now? I think nobody!