IndiGo Plans Low-Cost Int’l Flights With Or Without Air India

IndiGo won’t follow the ‘Air India model’ if it acquires the airline, but will run it on its own business model.

Budget carrier IndiGo’s parent is not interested in any joint venture with the government if it takes over some of Air India Ltd.’s operations.

The private airline is primarily interested in the international operations and low cost unit of Air India, founders Rahul Bhatia and Rohit Gangwal said in a conference call on Thursday. The carrier, however, plans to start low-cost, long-haul operations, with or without Air India, they added.

IndiGo, owned by InterGlobe Aviation Ltd., had expressed interest in the loss-making national airline shortly after the government announced its definitive intent to divest its stake in Air India. The state-run carrier faces legacy issues and has a debt of over Rs 52,000 crore. It is surviving on a Rs 30,000-crore bailout package announced by the government in 2012.

Key Takeaways From The Conference Call

• IndiGo is not looking to acquire all of Air India’s businesses, and is only interested in its international operations, and low-cost subsidiary Air India Express.
• IndiGo may also be interested in some of Air India’s domestic operations, if the government were to fragment it and sell.
• Air India’s international operations, would bring a very important element to IndiGo’s network, as it plans to start its own low-cost, long haul operations.
• IndiGo had no plans to follow the ‘Air India model’ if it acquired the airline, but would run it based on its own business model. The founders of IndiGo believed they could dramatically bring down costs of Air India.
• IndiGo felt it was time for a long-haul, low-cost airline as airline technology had advanced a lot over the past decade allowing the same. The market it saw in long haul operations was one where it planned to snatch long-haul flyers from airlines offering expensive tickets.

• IndiGo plans to go ahead with low-cost, long-haul flight operations with or without Air India, but said it was aware of the fact that the latter would take very long.
• Air India’s biggest assets were its staff and its routes, IndiGo felt, adding that the losses of the airline couldn’t be blamed on its employees.
• Irrespective of which airline ends up buying Air India, IndiGo doesn’t see the transaction going through in under a year, considering the complexities associated with such a diversified entity being offloaded.

• IndiGo said it was against the idea of a foreign airline buying out Air India, saying the airline would use the national carrier’s bilaterals and slots to its own benefit, and not to the benefit of India.
• IndiGo doesn’t want to buy any of Air India’s assets that it would eventually look to monetise, and only its flight operations interest the carrier.
• IndiGo planned to operate as an asset-light entity even if it ended up buying Air India, and had no plans to go full service. The carrier didn’t wish to go asset heavy on issues around ground staff, maintenance, and catering.

(The article was originally published on BloombergQuint.)