IndiGo decides to drop out of bidding race for Air India because of the bundled deal

New Delhi, April 107, 2018:  IndiGo Airlines yesterday dropped out of the race to acquire the beleaguered Air India, just a week after the civil aviation ministry came out with the preliminary information memorandum for inviting Expression of Interest from interested bidders. That’s pretty bad news for the government hoping to maximise the bidding competition, as civil aviation secretary RN Choubey had previously put it.

“From day one, IndiGo has expressed its interest primarily in the acquisition of Air India’s international operation and Air India Express. However, that option is not available under the government’s current disinvestment plan for Air India,” said Aditya Ghosh, president and whole time director of the airline, in a statement.

Indeed, IndiGo, a market leader in the Indian skies with close to 40 per cent share, was one of the first players to show interest in the ailing airline soon after the government gave its in-principal approval in June 2017 for the disinvestment of the national carrier. It had written to the civil aviation ministry expressing its interest.

The government had previously said that the flag carrier and its various subsidiaries would be hived off into multiple units and sold separately. The core airline business – Air India and Air India Express, it low cost arm – was expected to be offered as one company. But in the recently-released memorandum, the government revealed that the deal on the table also includes Air India SATS Airport Services Pvt Ltd, an equal joint venture between the national airline and Singapore-based SATS Ltd according to businesstoday.in.

“As we have communicated before, we do not believe we have the capability to take on the task of acquiring and successfully turning around all of Air India’s airline operations,” Ghosh added.

According to businesstoday.in interestingly, last year IndiGo’s share price had plummeted after the airline expressed its interest in the unprofitable and highly-indebted Air India, reportedly wiping out more than $500 million in its market value. The Bloomberg report had added that the co-founders of the airline had to step in to allay concerns. This time, too, the market seems to be celebrating the decision: The share price of InterGlobe Aviation, the parent company of IndiGo, hit a new all-time high of Rs 1,459.90 this morning.

So who’s left in the running for Air India? According to media reports, a consortium led by Jet Airways along with European airliner Air France-KLM and US-based Delta Airlines has expressed interest. Then, at a press conference in January, Vistara CEO Leslie Thng had said that the airline’s promoters – Tata Sons Limited and Singapore Airlines – were keeping “an open mind” about it. David Lim, the head of the Singapore Airlines’ India business, too, used the same words earlier this month about throwing its hat in the ring.

The government hopes to announce the winning bid by May 28, so expect more buzz in this space in the days ahead.

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