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Vistara may explore opportunities to bid for Air India

Vistara, the airline majority-owned by the Tata Group, may explore opportunities to bid for Air India, executives close to the matter said, even as industry insiders said they expect the national carrier to finally find a buyer with the government offering to sell 100% stake.

Last Updated: Jan 28, 2020, 08.10 AM IST
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Vistara, which started with a capital of $100 crore, has been slow to expand and currently accounts for just 6.1% of the domestic market.

Mumbai | New Delhi: Vistara, the airline majority-owned by the Tata Group, may explore opportunities to bid for Air India, executives close to the matter said, even as industry insiders said they expect the national carrier to finally find a buyer with the government offering to sell 100% stake.

On the face of it, the 100% divestment offer “does not seem worth rejecting” and therefore makes it as attractive to Tatas as to other industry players, said an executive. “There is the emotional goodwill part to it too, considering that it was part of the Tatas initially (before the government nationalised Air India). It is too early though to make any blanket statement,” said the executive. “We have just received the documents and there is a lot of matters that need detailed consideration in terms of its financial status.”

Vistara, jointly owned by Tata Sons and Singapore Airlines, may consider the opportunity through an alliance with an investor or another airline as it would be a tough task for a single player to handle the acquisition. Tata Sons declined to comment.

Acquiring Air India would give Vistara a significant foothold into the national carrier’s network, something it needs for scale. Vistara, which started with a capital of $100 crore, has been slow to expand and currently accounts for just 6.1% of the domestic market. It started international flights only last year. Until November last year, Air India and its regional subsidiary, Air India Express, ferried the highest number of international passengers among Indian carriers. In fiscal 2019, it carried around 22.1 million passengers. As of end-November 2019, it had a fleet of 121 planes.

An India executive of a foreign airline said Air India was a phenomenal brand recognised globally. He said the deal looked lucrative enough for anyone to invest, and foreign airlines too would be interested. “The government has addressed almost all the issues of the industry with this and the debt figures also look much more attractive now. We should see some bids from various airlines, who would like to tap the growing Indian market,” said the executive, speaking on the condition of anonymity. Analysts, however, said the airline’s debt and losses would be difficult for any investor to grapple with. Its accumulated losses totalled Rs 40,628 crore as per latest government estimates.

Mark D Martin, the founder of Martin Consulting and an aviation expert, said Air India should rightfully go back to the Tatas which is a better aerospace company with aviation in its DNA. “But this is not the right economic climate to sell AI since it will be a garage sale. None of the investment companies are willing to make any major commitment into India currently in a market where domestic consumption has dropped significantly.” ET had earlier reported that Etihad and IndiGo had shown some interest in acquiring a stake in Air India.

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