Should Air India be privatized

Etihad and Indigo interested in Air India

Air India makes a loss of 2.5 to 3.3 million euros per day. That’s what India’s Aviation Minister Hardeep Singh Puri told reporters. After previous warnings that even the operation of the state airline was in danger, the minister said that it would ensure that Air India remained in the air until the airline was privatized. The sale is necessary in view of the losses incurred by taxpayers.

The state had already tried to sell 76 percent of the shares in the airline in 2018, but could not find a buyer. India now wants to part with 100 percent. And that piques the interest of Etihad and Indigo. "Representatives of these companies have met with government officials and have shown an unofficial interest in the national airline," a government source told the Economic Times.

Etihad needs a partner

The Tata Group, to which Air India's predecessor Tata Airlines once belonged, is said to have no interest. The group already operates the Indian Vistara in a joint venture with Singapore Airlines, with which Lufthansa will work more closely in the future. Tata holds 51 percent of the joint venture, Singapore Airlines 49 percent.

It is also said that a number of financial investors had their eyes on Air India. That could be important for Etihad. Because as a foreign airline, it is not allowed to hold more than 49 percent of the shares in an Indian airline. However, it would be possible for the airline to take over 100 percent of Air India with the help of a state fund from Abu Dhabi, the paper writes. Because the 49 percent limit only applies to airlines as buyers, but not to investment companies.

Difficult integration for Indigo

Etihad's interest is surprising, as it had already failed with its 24 percent stake in Indian Jet Airways. The airline had to cease operations in April. Etihad was not ready to save the airline with a cash injection.

Should Indigo strike at Air India, a real giant would emerge. It was not until December that the airline broke through the fleet size of 250 aircraft as the first Indian airline. Especially in international business, Indigo could strengthen itself through the acquisition. However, it would be a major challenge to bring Indigo's budget airline model together with that of the state airline.