Asserting that IndiGo was interested in buying Air India’s international operations only, promoter Rahul Bhatia, in an analyst call on Thursday, said that it was clear about not acquiring any assets unrelated to Air India’s international operations that would need to be monetised later.
“We are not interested in taking on assets, which we have to monetise later. We don’t know how to do those things… If we just focus on the international operations, we can all figure out what maybe a legitimate working capital associated with it and deal with that situation. But the idea that we are going to take on debts and liabilities that are not related to the international operations is a very foreign, alien concept in any transaction,” Bhatia said.
On June 28 — the day Cabinet granted an in-principle approval for strategic disinvestment of Air India and five of its arms — IndiGo president and wholetime director Aditya Ghosh wrote to civil aviation minister Ashok Gajapathi Raju expressing interest in buying Air India’s international operations.
Another promoter, Rakesh Gangwal, who also addressed the analyst call, pointed out that any decision by IndiGo to build an international, low-cost operation would depend on the business case being “EPS accretive”.
“Our journey of building an international, low-cost operation will be gradual – a journey that we would take thoughtfully and deliberately… whether we do some limited transaction with Air India, or launch our own long-haul, international operations or a combination of both, the business case would need to be EPS (earnings per share) accretive for us to go down that path,” Gangwal said.
Whether the government is looking to carve out separate operations from Air India, or is planning to sell all its businesses is so far unclear. Under the chairmanship of the FM, the government has formed a committee to guide the strategic disinvestment process, and take decisions on aspects such as treatment of Air India’s debt, hiving off of certain assets to a shell company, demerger and strategic divestment of three profit-making subsidiaries, among others.
Bhatia said that the concept of airlines carving out certain operations for selling them was not new. “A few decades ago, United Airlines acquired Pan Am’s Pacific operations. United then followed up by acquiring Pan Am’s London routes in 1990. Today, United Airlines is one of the largest international carriers and it is questionable if that would have happened but for those acquisitions. United was able to do with those international routes and route authorities what Pan Am was unable to do principally because United had a large domestic feed network. As a matter of fact, American Airlines followed that same model…” he said.