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IndiGo, Qatar Airways to make a joint bid for Air India

New Delhi: As the government prepares to call for preliminary interest memorandum (PIM) along with expression of interest (EoI) from parties interested in gaining control of the national carrier, Air India, sources said that low-cost carrier IndiGo is likely to make a bid along with Qatar’s national carrier, Qatar Airways, in a consortium.

After the announcement that the government would be selling off Air India, the civil aviation ministry had said that IndiGo had expressed interest in buying the carrier. IndiGo also confirmed the same but said its first priority would be to buy the overseas flights of Air India if the government broke and sold the domestic and international flights as separate entities. However, government sources have said no such bifurcation would be made.

Sources also clarified that the net worth criteria that bidders must meet is likely to be fixed at Rs 1,000 crore, calculated on the basis of an existing formula under the Companies Act, before they are allowed to put in bids and access the bid data room for Air India.

So, while the airlines bidding for Air India can have a negative net worth, at least one of the partners in the consortium must have to have a positive net worth. “This means these airlines can come together and bid as a consortium with a private equity partner or a sovereign wealth fund,” said a source involved in the process of Air India divestment. FE had earlier reported that prospective bidders will have to meet the net worth criteria to qualify.

IndiGo’s net worth at the end of FY17 was Rs 3,779 crore ($583 million), while Qatar Airways had a net worth of $15.8 billion at the end of FY16, according to Bloomberg data. Qatar has a fleet of 200 aircraft and flies to 150 destinations. It is part of the oneworld global alliance which gives it access to nearly 1,000 airports across the globe.
For IndiGo, acquiring Air India will be a game changer, giving it greater market dominance in domestic flights (the two airlines together account for more than a 50% share) and a ready platform to ramp up its international services with ready slots at some of the most coveted airports across the world and an enviable fleet of 68 wide body aircraft.

Qatar Airways, owned by a sovereign fund, is facing turbulence back home due to a blockade by Arab nations, which have accused it of supporting terrorism. The airline is now actively looking to extend its operations outside the region by making relevant investments that will aid growth. Qatar Airways has for long been looking to get a foothold in the Indian aviation market, and it has specifically expressed an interest in Indian budget carrier IndiGo on several occasions. A bid for Air India, could just offer that opportunity.