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Indigo airlines expresses interest in buying Air India; the next steps

The Cabinet on Wednesday gave an in-principle approval for the disinvestment of debt-laden Air India (AI). Will this signal the end of turbulent times for Air India and revive the Maharaja's fortunes? WION explores Photograph: (WION)

WION Web Team New Delhi, Delhi, India Jun 29, 2017, 09.48 AM (IST)

Indigo airlines has expressed "unsolicited interest" in the Air India disinvestment process, India's Civil Aviation Ministry said on Thursday.

IndiGo President Aditya Ghosh wrote a letter to Civil Aviation Minister Ashok Gajapathi Raju soon after the Cabinet gave an in-principle approval for Air India's disinvestment last week.

"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 said.

In the letter, Indigo said it was interested in buying out the international operations of Air India and its low-cost wing, Air India Express.

If that was not possible, it would like to buyout the entire Air India flight operations, including domestic flights, Aditya Ghosh said in the letter.

"Indigo airlines has written a letter to the Civil Aviation Ministry showing unsolicited expression of interest in Air India disinvestment process, Ministry of Civil Aviation Secretary RN Choubey confirmed.

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

India on Wednesday gave approval to privatise Air India, the first step of a process that could see the government offload an airline struggling to turn a profit in the face of growing competition from low-cost rivals. 

The first step taken by the Cabinet will be to form an Alternative Mechanism headed by the finance minister and including the civil aviation minister and various other ministers. The body will look into the treatment of Air India's unsustainable debts, hiving off certain assets to a shell company and the 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.

Top officials said the government's decision to look at ways to privatise Air India is in line with its efforts in the past two years for a turnaround of the Rs 52,000 crore debt-ridden airline, which 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 they will invite inputs from various stakeholders, including former civil aviation ministers.

Asked whether air travellers should book their flights for holidays planned next year, minister Jayant Sinha said.

"All commitments and contracts will be fully honoured, including those made to passengers, employees and financial institutions".


 

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