In a bid to extend their flight network, India’s top 2 commercial carriers, IndiGo Airlines and Jet Airways, are ready to go into a bidding war to take control over 76% stake in Air India.
The 76% of Air India on offer is worth more than 220 billion rupees ($3.37 billion), based on an Air India valuation of above 300 billion rupees. Prospective buyers have until May 14 to voice interest. Winning bidders will be announced May 28.
Interglobe Aviation, IndiGo’s Operator, has shown a keen interest in the airline’s takeover since day one and for a long time, it was the only Indian carrier who was eligible to bid for a stake in Air India, because Interglobe is the only airline company in the country with a positive net worth. Indigo is a marketing leading airline with about 40% market share. This is because of its regular flights and a reputation for reliability.
However, most of the IndiGo flights operate domestically and purchasing Air India, with its network of international routes, will surely expand IndiGo’s reach in one move.
Jet Airways has recently entered the bidding war. It will partner with international airlines such as Air France, KLM and Delta Airlines to buy the 76% stake in Air India. Buying Air India would help Jet gain advantage over immediate rivals IndiGo in international flights. In the international segment Jet Airways has a code-sharing agreement with Air France and Delta.
Apart from these two giants of the Indian aviation industry, Singapore Airlines is looking to bid as the government has allowed foreign investors to buy up to 49% stake in Air India. Singapore Airlines have shown interest in the Indian market of late. They say that India is ‘strategic market’ based on their experience with their airline Vistara, a joint venture between Singapore Airlines and Tata Group.
According to Jayant Sinha, minister of state for civil aviation, the government’s price for the Air India stake may go up, as the government will not accept bids below the minimum value that they set.
At the end of 2017, Air India increased its domestic network to 39 cities. It is also a member of the global Star Alliance.No domestic airline can match the Air Indias international service, in the Middle East and Southeast Asia. The carrier operates 137 flights a week to the Middle East, 68 to Europe and 56 to Southeast Asia. It serves popular airport hubs such as Dubai, London, and Bangkok.
The Indian government have put 150 billion rupees for three years till March 2016 to revive the national carrier. Privatisation of Air India and its subsidiaries will help ease the burden on the national budget.
India is one of the world’s most promising markets for air travel and national as well as international carriers have realized this. Once the results of the bid are announced by the end of May, whoever is fortunate enough to win the bid, is surely in for a profitable future.