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Indian Airlines board has approved plans to list 10% of the carriers shares, to help raise funds for new aircraft.
It is a major step for the state-owned carrier and follows a recent directive from Indias Civil Aviation Ministry to Indian Airlines and Air India to work towards IPOs in 2006. Jet Airways recently completed a highly successful IPO of 20% of its shares, while Air Deccan plans to complete its IPO by September 2006.
Indian Airlines has staged a turnaround in the past two years, following three consecutive annual losses. The carrier targets a net profit of INR107.5 million in the financial year ending March 2006, but needs to upgrade its fleet to remain competitive and take advantage of expansion opportunities. The government recently decided to inject INR32.5 billion to help it acquire 43 new Airbus aircraft, which are estimated to cost INR90 billion. But Indian Airlines hopes to make up the funding shortfall from private investors.
Centre for Asia Pacific Aviation estimates India's commercial aircraft fleet will increase from 175 currently to over 450 by 2010. This is a conservative figure and based on fleet plans of existing and new start-up LCCs. Up to 14 low cost carriers (LCCs) are preparing to launch services in India over the next 12 months, with another 5-6 currently in the planning stage.
Indian Airlines is clearly facing significant competitive challenges and opportunities over the short-medium term. Raising fresh equity fits neatly into the governments broader approach to developing the aviation industrys potential with the assistance of private funds.
The Background What the Board Approved:
Indian Airlines board of directors approved (31 March) the following strategic developments:
- Initial Public Offering (IPO): 10% of total shares possibly in early 2006, subject to government approval, to help fund fleet expansion plans. Further details were not disclosed;
- Ground Handling JV: Approved formation of a joint venture with Singapore Airport Terminal Services (SATS) for handling passengers, cargo, ramp and security services at various airports in India, subject to government approval. This joint venture seeks to enhance the third party ground handling revenues, in addition to providing high quality self handling for Indian Airlines;
- Fleet: Decided to lease ten more A320s from Winter 2005 for expansion of domestic and international services;
- Financial results: Approved revised estimates of a INR175 million net profit in the 12 months ended 31 March 2005, compared with a INR441.7 million net profit in the previous corresponding period, due to higher fuel prices. Revenues were estimated to have risen to INR52.5 billion in 2004/05 from INR46.5 billion in 2003/04. Indian Airlines forecasts a net profit of INR107.5 million in the 12 months ending 31 March 2006.
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Indian Airlines prepares for the future 
