Saturday, July 08, 2017

IndiGo’s interest in Air India may simply be a proxy for its long-haul flight plans

New Delhi: IndiGo promoters Rahul Bhatia and Rakesh Gangwal’s conference call with investors on Thursday was, according to them, meant to “spell out potential plans regarding long-haul international flying.”

The promoters also spoke at length about Air India’s disinvestment and how IndiGo was interested in Air India’s international operations and in Air India Express.

Is IndiGo depending on Air India’s disinvestment to pan out its expansion? That does not seem to make much sense, given that while the government may have decided to go in for in-principle divestment of its stake in Air India, it is still unclear on what the contours of the disinvestment will be. IndiGo’s promoters are suggesting that Air India’s domestic and international operations be segregated when bids are invited from interested parties.

Even if the government segregates AI’s domestic and international operations, as was the case before 2007 when Indian Airlines primarily operated domestic flights while Air India concentrated on long-haul flights, there is no certainty that IndiGo will be the preferred bidder.

Just as important is the fact that Air India’s and IndiGo’s business models are poles apart. IndiGo is a low-cost airline, and its promoters have made clear it will continue to be a low-cost airline flying on international long-haul routes. Air India, on the other hand, is a full-service airline; its long-haul flights offer a choice of first, business or economy class.
07/07/17 Aswini Phadnis/Business Line