IndiGo shares take off after airline denies interest in Virgin Australia

• Reports had said that Rahul Bhatia of Interglobe aviation that runs IndiGo is now evaluating data to place a bid for the collapsed Virgin Australia.
• IndiGo on Tuesday morning denied those reports.
• Soon, as the markets opened IndiGo’s share price jumped by 1.88% while the rest of the market melted.

Late on Monday (May 11), Bloomberg quoted a report to say Rahul Bhatia of Interglobe aviation, which runs low-cost airline IndiGo, is now evaluating data to place a bid for the collapsed Virgin Australia and was “looking to relaunch the airline in its original form as a low-cost carrier to return it to profit”.

However, IndiGo denied those reports. “We deny the contents of these reports and would like to clarify that the Company has not formulated any indicative proposal, nor does it have any interest in this matter,” said a statement from IndiGo on Tuesday morning. IndiGo’s share price jumped by 2.66% after the announcement.

In April 2020, Virgin Australia had announced bankruptcy as its debts piled to $6.8 billion to over 12,000 creditors which includes employees. The coronavirus pandemic only worsened things for the airlines.

With the aviation sector being badly hit due to coronavirus, and domestic and international flights having come to a halt, IndiGo had announced pay cuts across the board. It had said that its senior employees would get a pay cut of upto 25% for the entirety of 2020-21, while also rolling out a leave without pay plan.

Not just IndiGo, but other Indian airlines like Vistara, Spicejet too had announced pay cuts across the board.

The fear of the crashing aviation sector is real. Billionaire Warren Buffett’s company Berkshire Hathaway recently sold all of its stocks in US-based airlines – Delta Airlines, American Airlines, Southwest Airlines and United Airlines. Buffett had gone on to say he was “wrong to invest in the airlines industry.”

“We expect it will take 18 months at least, before travel demand returns to a semblance of normality,” Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive, Emirates Airline and Group, said this week after the group, which operates one of the world’s largest airlines, posted 28% fall in profit as global travel came to a standstill in March.

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