India's largest airline IndiGo has pulled out of the race to acquire national carrier Air India, dealing a blow to the government's privatisation campaign. Indigo told the Bombay Stock Exchange late Thursday that it was interested only in Air India's international routes and not its domestic operations.
The government, which said last week it wants to sell a 76 percent chunk of the debt-laden carrier, wants the prospective buyer to take on all of Air India's operations. The government last week released bid documents on one of the country's highest-profile asset sale in decades. The documents said the proposed sale would include a 100 percent stake in Air India's low-cost arm Air India Express, which operates in West Asia, and a 50 percent stake in its ground-handling SATS Airport Services.
"From day one, IndiGo has expressed its interest primarily in the acquisition of Air India's international operations and Air India Express," IndiGo president Aditya Ghosh said in the statement to the stock exchange. "However, that option is not available under the government's current divestiture plans for Air India. "Also, as we have communicated before, we do not believe that we have the capability to take on the task of acquiring and successfully turning around all of Air India's airline operations." IndiGo publicly expressed interest in acquiring Air India's international operating arm after the government first approved a sale in June last year.
Once the country's monopoly airline, Air India has slowly lost market share to new low-cost private players in one of the world's fastest-growing airline markets. Air India ran losses for nearly a decade after a botched merger in 2007 and has debts of around $7.67 billion according to government figures. It has received $5.8 billion in bailout funds from the government but needs even more working capital to turn it around, experts say. India has the world's fastest-growing passenger airline industry, expanding at an annual rate of around 20 percent.
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