Indigo, the budget carrier owned by Interglobe Aviation, has evinced interest in picking up a stake in national carrier Air India on Thursday, a day after the Modi government decided to divest its holding in the loss-making venture.
"We received unsolicited expression of interest from IndiGo on Air India," News18.com quoted Civil Aviation Secretary RN Choubey as saying.
Other carriers have also evinced interest, it seems."Several companies have approached informally for Air India stake. Got interest from both domestic and international airlines. Haven't received any formal communication," Minister of State for Aviation Jayant Sinha said.
Indigo is the largest carrier in India's domestic air traffic space, with a market share of around 40 percent in terms of passengers carried.
The Interglobe Aviation stock closed 2.21 percent lower at Rs 1,235 on Thursday after hitting a fresh 52-week high of Rs 1,273 on the Bombay Stock Exchange. The BSE Sensex ended 23 points higher at 30,857, shedding gains made in the morning session.
Air India's market share has been a sharp fall over the years, from 35 percent about a decade ago to hover around 14 percent now, behind low-cost Indigo (market share ~40 percent) and Jet Airways (~15 percent).
Anand Mahindra, chairman of the $19-billion Mahindra Group that has interests in aerospace, financial services, information technology and automobiles, came up with an interesting response when asked whether he is interested in buying a stake in Air India.
An uphill task given its financials, Air India's privatisation would enable the Modi government to establish its "reformist" credentials, tweeted Sadanand Dhume, a Wall Street Journal columnist.
The other suitor that has been widely rumoured to buy out Air India is the Tata Group, which owned the airline before it was nationalised in 1953 by the then Prime Minister Jawaharlal Nehru.
Air India has an accumulated a debt of about Rs 50,000 crore and staff strength of around 20,000; it earned an operating profit of Rs 105 crore in 2015-16 on total sales of Rs 20,526 crore.
Foreign players ruled out
As for foreign carriers, the present FDI norms do not allow foreign carriers to own more than 49 percent in Indian civil aviation companies, though overseas entities can buy up to 100 percent. Limiting the maximum stake to 49 percent for foreign carriers is a dampener, since no foreign airline would be interested in buying a stake that does not give controlling interest.
With two aviation companies — low-cost carrier AirAsia India and full-service carrier Vistara — already in its wings, there could be a conflict of interest if the Tatas emerge as a bidder.
Also read: Tatas eyeing state-run carrier Air India?
Air India at a glance
Fleet size: 119 aircraft, including 19 on dry lease
Financials: 2015-16 - Sales: Rs 20,526 crore; operating profit: Rs 105 crore
Subsidiaries: Five (Air India Charters; Hotel Corporation of India; Air India Engineering Services; Airline Allied Services and Air India Air Transport Services)
Debt: ~Rs 50,000 crore
Employees voice opposition
Meanwhile, employees of Air India met the government think-tank Niti Aayog's vice-chairman Arvind Panagariya and expressed their concerns over privatisation of the airline. "We have handed over the memorandum of AIEU to Panagariya which is self-explanatory. We insisted that job security and welfare facilities of existing and retired employees should be taken care of in case of privatisation," Parag Azgaonkar, president of the Air India Employees Union (AIEU) was quoted as saying by the Indian Express on Wednesday.