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Bloomberg
India’s plan to sell a stake in the national carrier just got a fillip a day after the government decided to sell Air India Ltd., with the nation’s biggest airline expressing an interest to buy the state airline.
IndiGo is keen to buy the flag carrier, Civil Aviation Minister Ashok Gajapathi Raju said in comments relayed by an aide.
Shares of the budget airline, which declined to comment citing a silent period before earnings, dropped as much as 3.8 percent in Mumbai, the biggest intraday loss in more than a month. A local television channel reported SpiceJet Ltd., IndiGo’s smaller rival, was also interested, which the government denied. SpiceJet shares fell on the report before rebounding.
A group led by India’s finance minister will decide on the amount of stake to be sold and Air India’s debt, Finance Minister Arun Jaitley told reporters in New Delhi. A government panel had recommended privatizing the airline by possibly asking the buyer to absorb more than $3 billion of loans linked to aircraft purchases.
While any interest from IndiGo may be good news for the government, Air India’s allure will depend on India’s ability to write off nearly half of the $8 billion debt that’s not backed by assets. Unprofitable for a decade, the decision to privatize the airline underscores Prime Minister Narendra Modi’s will to risk a potentially unpopular decision at a time when many of the nation’s state-run lenders have been seeking capital injection from taxpayer funds amid mounting bad loans.
This isn’t the first time India is attempting to sell the airline. In 2000, the Tata Group had teamed up with Singapore Airlines Ltd. to bid for a stake when the then-government headed by Vajpayee sought to sell as much as 60 percent of the carrier.
Subsequent governments have shied away from a sale even as its share in the local market plummeted to 12.9 percent from 35 percent a decade back, placing it joint-third along with SpiceJet Ltd. The company, saddled with a debt burden of about $7.8 billion, made an operating profit of about 1 billion rupees in the year through March 2016, aided by a drop in oil prices. It still posted a net loss of 38.4 billion rupees.
IndiGo, operated by InterGlobe Aviation Ltd., may face rival bidders too. Tata Sons Ltd., the conglomerate that had expressed interest in Air India back in 2000, may again be drawn to a potential sale, some local media have reported.
The carrier, which is known for its Maharajah brand icon, traces its roots to Tata Airlines, founded in the 1930s by the then-patriarch of Tata Group, J.R.D. Tata. A member of the global Star Alliance, it now has a
fleet of about 154, according to
government data.