IndiGo's Interest to Buy Air India Boosts Government Sale Plan
IndiGo, India's biggest airline, expressed interest to buy a stake in national carrier Air India Ltd., giving a boost to the government's plan to sell the unprofitable company saddled with almost $8 billion of debt.
The budget carrier operated by InterGlobe Aviation Ltd. has written to the government that it's keen to acquire the airline operations of Air India and its budget airline unit Air India Express Ltd., the company said in a filing Thursday. The expression of interest came a day after Prime Minister Narendra Modi's administration gave a preliminary approval for the sale and ordered a ministerial panel to explore options.
"It's time for India to take back its fair share of international traffic, and bring back this economic wealth to where it rightfully belongs," IndiGo President Aditya Ghosh said in the letter, citing his company's track record of creating a profitable airline with strong balance sheet.
While IndiGo's intent 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 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.
Shares of IndiGo dropped 2.2 percent in Mumbai on Thursday, the biggest decline 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 0.2 percent.
IndiGo 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. N. Chandrasekaran, the chairman of the group, led informal talks with the government to buy 51 percent of the airline, again partnering with Singapore Airlines.