Jet Airways-Air Sahara deal hits air pocket
Mumbai/New Delhi : India's largest acquisition in aviation industry has hit an air pocket due to a delay in regulatory clearances to Jet Airways for buying rival Air Sahara for Rs.23 billion (over $500 million), officials said Tuesday.
The buy-out pact between the two airlines - under which Jet had paid an advance of Rs.5 billion into an escrow account to keep the mega deal going - ends in 48 hours, officials of the two airlines added.
"Jet Airways wishes to clarify it is still awaiting all regulatory approvals and the fulfilment of all conditional precedent," said a Jet Airways statement. The airline has been operating Air Sahara since April with its own management team.
"We have nothing to comment at this moment. We still have two more days and both sides will look into all options available. So far as we are concerned the deal is still on," a senior Air Sahara official.
"If the situation so demands, we could go for the option of a further extension of the deadline of the escrow account," the official said. The two airlines had decided in March to extend the terms of the share purchase pact by 90 days.
Aviation industry sources said security and regulatory clearances were not the only reason for the deal hitting the air pocket - Jet management, they said, now feels the price tag of Rs.23 billion was much too high.
"If the deal does not go through it will be for commercial reasons than anything else. Besides, they have seen for themselves that Air Sahara has been piling up losses," an aviation analyst told IANS Tuesday.
Sources told IANS that the Intelligence Bureau had raised some concerns over the past history of one of the investors of Jet Airways when the agency had prepared a report on the airline three years ago.
Similar concerns were also raised when Jet tried to enter the US market.
Sources said the government has not given the green signal to Jet chief Naresh Goyal yet to join the board of Air Sahara though the latter has already secured clearances for four of its nominees on the newly reconstituted panel.
One senior official was also puzzled as to how security had become an issue for Goyal who already operates an airline. "What difference does it make if Goyal is on the board of Air Sahara or not. He can still run it, can't he?"
Jet Airways had announced in January this year it was buying Air Sahara, subject to government approvals, to create India's largest airline - even bigger than the state-owned Indian Airlines with a 90-aircraft fleet.
"We might even start operations to the US this year subject to the government nod," a jubilant Goyal, who is based in Mumbai, had said, adding that Air Sahara will be an extinct brand once the government approves the takeover.
At that time, Jet Airways was already the top private carrier in India with a 40 percent market share in domestic aviation. With the new deal, its share was set to go up to more than 50 percent, aviation industry sources said.
