April 13, 2007

Jet Airways agrees to Air Sahara takeover

NEW DELHI: Jet Airways, India's largest domestic carrier, signed a deal to buy Air Sahara on Thursday after more than a year of negotiations.

Jet Airways said that it would pay 14.5 billion rupees, or $338 million, one-third less than the price the two had originally agreed on in January 2006. That deal fell apart in June when Jet Airways balked at the valuation even after it had already paid 5 billion rupees toward the purchase price.

Together, Jet and Air Sahara will have about 90 aircraft, and 10,000 employees. Jet Airways, which flies between London and India and throughout Asia, will increase its international flights to Singapore and the Maldives with the deal. Air Sahara could become the low-fare unit of Jet Airways, analysts and Indian newspapers said on Thursday.

Several low-fare airlines have started up in India in recent years to tap rising demand for air travel among the country's fast-growing middle class.

But competition has driven down fares to the point where most of these airlines are losing money, prompting most industry analysts to project consolidation in the sector.

The Center for Asia Pacific Aviation estimates that India's airline industry will lose $500 million in the year ending March 31. India's two state-run airlines, Air India and Indian Airlines, plan to merge this year.

Jet's chairman, Naresh Goyal, will lay out more details of the Air Sahara deal on Monday in Mumbai.

Jet shares have dropped since the company went public in March 2005 to about 60 percent of their initial value. They closed up 3.2 percent on Thursday on the Bombay Stock Exchange, at 628.65.

Air Sahara is part of the private conglomerate Sahara India Pariwar, which also owns hotels and mutual fund companies, among other assets.

Jet will pay Sahara 4 billion rupees before April 20 and the remainder in equal annual installments for four years starting March, Bloomberg quoted Jet's chairman, Naresh Goyal, as saying in Mumbai. The acquisition may raise the carrier's debt, Mark Webb, an HSBC Group analyst in Hong Kong, wrote in a report on Thursday, Bloomberg said.

By: Heather Timmons
Via: International Herald Tribune

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