Etihad Airways (EY, Abu Dhabi Int'l) and IndiGo Airlines (6E, Delhi Int'l) have shown preliminary interest in acquiring Air India (AI, Mumbai Int'l), The Economic Times has reported citing unnamed sources.

The two potential buyers met with the representatives of the government to discuss terms. The government of India, which currently wholly owns the flag carrier, is seeking to sell a 100% stake in the first half of 2020 but has yet to formalise the terms of the tender. The formal call for Expressions Of Interest (EOI) is expected in January.

Etihad, which owned a 24% stake in Jet Airways (9W, Mumbai Int'l) but decided against bailing out the airline when it collapsed in April 2019, would need to bid together with a partner as foreign airlines are limited to a 49% stake in Indian carriers by law. However, the law permits foreign entities - which are not airlines - to assume full control of Indian airlines. As such, Etihad would not necessarily need an Indian co-investor.

IndiGo Airlines, a low-cost carrier, is currently India's largest airline with 1,856,652 seats on sale per week, compared to Air India's 583,836, the ch-aviation capacities module shows.

The government is planning to assume or waive some two-thirds of Air India's debt, currently amounting to INR600 billion rupees (USD8.4 billion), prior to the sale.

Meanwhile, state-owned news agency PTI has reported that officials are increasingly acknowledging that if the privatisation of the carrier fails, Air India will have to be shut down. An unnamed airline executive said that "piecemeal arrangements", such as extending short-term loans, providing addition bailouts, and selling remaining assets of the airline, were not sustainable. Failure to find an investor could result in Air India being grounded by June 2020.