IndiGo rethinks buying Air India’s global operations?

01 Jul 2017


Budget carrier IndiGo's management, clearly having second thoughts on acquiring the international operations of the troubled national carrier, has told its employees that it will not go ahead with its proposal to acquire Air India if the deal "does not add value" to the company.

"Let me be very clear that if it is not profitable and does not add value to our employees, customers and shareholders, we will not embark on this journey," Aditya Ghosh, president and whole time director of IndiGo, said in a letter to its employees dated 29 June.

"At the same time, we recognise that the Indian government is taking a big, much needed decision and it is important that this decision is always remembered as a huge success," he said.

"As one of those who bleeds blue and who has helped build this great organisation, you can rest assured that your leadership team and the founders of IndiGo will never do anything to jeopardise what you helped build and will always act in the best interest of IndiGo," Ghosh said.

Earlier this week, just after the Union cabinet approved divestment of Air India, IndiGo – India's largest airline in terms of market share - had expressed an interest to buy the international business of the national carrier (See: IndiGo keen to buy Air India's international business).

"Over the past decade, we have created a significant domestic network and that gives us the confidence to build a world class international airline in the scale and scope of some of the largest airlines in the world," Ghosh said.

"Without our domestic feed network, it just does not make sense to embark on this journey and if we do go down this path, it would require significant restructuring of the acquired operations."

Ghosh added, "In that journey, we are not going to take on debts and liabilities that could not be supported by the new restructured operations."

According to civil aviation ministry secretary R N Choubey, a formal proposal from IndiGo was received after Wednesday's cabinet decision on Air India's divestment.

At present, the national carrier has a debt burden of more than Rs50,000 crore.

According to data from the Directorate General of Civil Aviation, 5.3 crore people flew in and out of India in calendar year 2016.

While Indian carriers - AI, Jet, IndiGo and SpiceJet - flew one-third of this traffic, international airlines had the remaining share. IndiGo's share in international air travel in and out of India last year was 3.4 per cent while the share of Air India and AI Express was 16.7 per cent.

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