In a setback for the Modi government’s ambitious plans to sell debt-ridden Air India, IndiGo, operated by Interglobe Aviation, has withdrawn from the race to bid for the national carrier.

Aditya Ghosh, IndiGo president and whole time director, said in a statement to investors the airline was interested primarily in the acquisition of Air India’s international operations and Air India Express, an option that is not available under the government’s divestiture plan.

“We do not believe that we have the capability to take on the task of acquiring and successfully turning around all of Air India’s airline operations,” Ghosh said.

The government recently released the preliminary information memorandum (PIM) inviting expressions of interest from potential bidders for the airline. The PIM stated the government will sell 76% of its stake in the entity that comprises Air India, its regional subsidiary Air India Express, and its stakes in AI-SATS–the ground-handling joint venture with Singapore Airport Terminal Services.

The buyer will also get Rs 33,000 crore debt as a part of the package–a liability so huge that it can deter potential buyers from bidding. In case of IndiGo, with a debt equity ratio of 0.69:1, the liability of Air India's debt could spell trouble as IndiGo's debt stood at Rs 2,597.74 crore as of March 2017.

Ever since the ministry of civil aviation came out with the PIM, analysts have not been too upbeat about the deal. “It doesn’t seem to be an attractive package. The large workforce, the huge debt are just too big for any player who is seriously looking at the Indian aviation market,” says a senior analyst on the condition of anonymity.

Besides, the large workforce of about 28,000 employees could be more of a liability than an asset for the buyer. IndiGo’s 15,000-strong workforce has an average age of 29 years as on March 31, 2017.

Interestingly, IndiGo was the first carrier to send an expression of interest last year when the government announced its plans to privatise the cash-strapped national carrier.

“As the government has embarked on the journey to privatising Air India and given IndiGo’s track record of having created a consistently profitable airline with a strong balance sheet, kindly treat this letter as an expression of interest in acquiring the international air operations of Air India and Air India Express. Alternatively, we are interested in acquiring all of air operations of Air India and Air India Express,” the airline had said in a letter to the ministry of civil aviation dated June 28, 2017.

Other potential bidders include Singapore Airlines, which is “open to the idea of bidding for Air India”, Qatar Airways, and Jet Airways. While SpiceJet’s name has been coming up time and again, the low-cost airline has categorically denied bidding for Air India.

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