Friday, July 07, 2017

Why IndiGo's Air India aspirations could be the death of the portly Maharaja

New Delhi: IndiGo is interested in acquiring Air India’s international operations and turning them into a low cost model followed by some international airlines on long haul routes. When the founders of India’s largest domestic airline said this on a conference call with analysts this evening, it was clear that the portly Maharaja - Air India's famous brand icon - as we know it will cease to exist if IndiGo were to buy a part or even whole of Air India’s airline operations. Brand Air India, long known for full service operations – with all the bells and whistles like complimentary meals, frequent flyer programmes, airport lounges etc on foreign as well as domestic routes – will likely have to be completely rebranded as a low cost, long haul airline.

IndiGo Founders Rahul Bhatia and Rakesh Gangwal also made it clear during the call that they were primarily interested in Air India’s international operations, that they would not want to take on debt other than the working capital loans and they wanted the government to completely exit from Air India (international operations or international plus domestic operations) if they were to buy the airline. Air India has about 17 percent share of India’s international air traffic, or not even a fifth.
“We won’t continue to operate the same way (international operations of Air India). We will redo whatever was being done before…..there will have to be fundamental structural changes and we will have to make investments in acquisition plus refocusing (the business). We will try and offset this against the revenue we expect to generate and difference should be by a wide margin,” Gangwal said.
Both Bhatia and Gangwal emphasized the importance of launching low cost international operations for IndiGo, saying this would be done with or without Air India. The duo also reluctantly said that in case the government did not offer just the international business of Air India but the entire airline, they would consider the offer. But it was clear that IndiGo’s eyes are firmly set on acquiring Air India’s wide body fleet, its lucrative flying rights, slots at congested international airports and then running a low cost operation of it all. It doesn’t seem to be salivating at Air India’s domestic business, which is also known to be high cost and inefficient though it is an intricate hub-and-spoke model offering unmatched connectivity.
06/07/17 Sindhu Bhattacharya/First Post