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Fri, Jan 20, 2006 - Page 12 News List

Jet Airways inks deal to purchase rival Air Sahara

INDIAN MARKET The purchase will increase Jet Airways' share of India's aviation market to more than 50 percent, and give it the nation's largest fleet


India's leading private carrier Jet Airways said yesterday it is buying rival Air Sahara for US$500 million in a takeover that will create the country's largest airline.

Jet Airways (India) Ltd and Air Sahara signed the deal -- the biggest in India's aviation history -- late on Wednesday, paving the way for a strategic alliance between the two carriers initially and a full-fledged merger eventually, Jet chairman Naresh Goyal said.

Air Sahara, a family-run company that is not publicly listed, has been losing money and is estimated to have piled up 6 billion to 7 billion rupees (US$120 million) in debt.

"We are not getting into liabilities. The total deal is valued at US$500 million, taking into consideration the parking slot, the infrastructure, the aircraft," Goyal told reporters after the company filed a notice of the deal to the Bombay Stock Exchange.

Earlier yesterday, Jet's board of directors approved the acquisition.

Deal boosts Shares

Investors welcomed the news, sending Jet Airways' shares up 2.6 percent to 1,158 rupees in early trading.

Goyal, who described the deal as a "total takeover," said his airline was not planning to retain all of Air Sahara's staff.

"No, we are not absorbing all staff. We will be taking pilots, technical staff and cabin crew, [but] it will be done on the basis of merit," he said.

Those comments appeared to spark protests among Air Sahara pilots, who decided to strike immediately to express opposition to the deal, the CNBC-TV18 channel reported.

Market share

The merged entity will control more than 50 percent of India's aviation market.

Last year, Jet Airways overtook state-owned Indian Airlines in flying the most passengers. With the acquisition of Sahara, it will also now have the largest fleet of aircraft.

Jet Airways flew 9 million passengers last year, up 14 percent from the previous year, while Indian Airlines carried 8.7 million people, up 3.5 percent from 2004. Sahara flew 3.5 million.

Jet's fleet include 52 aircraft, mostly Boeing planes, while Sahara has 27. Indian Airlines has an Airbus-dominated fleet of 77 planes, including 10 flown by its subsidiary Alliance Air.

India's aviation sector has experienced robust growth in recent years after being opened up to private carriers as part of a broader government liberalization program begun in the early 1990s.

The competition has brought down fares, which is attracting more passengers.

Aviation officials expect the number of fliers to grow from around the current 20 million a year to around 50 million in 2010.

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