By Nicholas Ionides in Singapore
India's Air Sahara is putting a brave face on the collapse of a deal under which Jet Airways was to have taken it over, saying it will now focus on reinstating shelved expansion plans.
Market leader Jet agreed in January to acquire Air Sahara from the Sahara Group for about $500 million but the deal collapsed when government approvals were not secured by a 21 June deadline and Jet refused to extend the closing date.
Air Sahara is seeking to assure the public that it is "business as usual". It says Jet employees who had been seconded to help run it have left and that "the operation is continuing as normal". Air Sahara says it will now focus on reclaiming market share lost to other domestic players. The failure of the takeover deal has put Air Sahara in a difficult position because parent company Sahara Group is not seen as committed to the business in the long term.
Meanwhile, aggressive new airlines have been expanding and since early this year, Air Sahara's domestic market share has fallen, from 12% late last year to 9% in May, according to the Centre for Asia Pacific Aviation.
Air Sahara has accused Jet of improperly walking away from the deal after seeking to renegotiate the purchase price in the days leading up to the closing deadline. The reason Jet felt it was able to walk away was that its chairman, Naresh Goyal, did not obtain government "security clearance" in time to join the Air Sahara board. That clearance reportedly came a day after the deadline passed.
Both sides are now in court seeking possession of hundreds of millions of dollars in an escrow account that was established for Jet to pay for Air Sahara. Sahara Group is also thought to be looking at whether it will be worth putting the airline back on sale.
Air Sahara says it will focus on expanding its domestic operation by acquiring more Boeing 737-800s, as well as expanding its limited international network to other parts of Asia. It currently serves Colombo in Sri Lanka, Kathmandu in Nepal and Singapore.
One of its first moves to re-establish itself will be the reinstatement of services to London. The aim is to restart four-times-weekly Delhi-London flights using a leased Boeing 767 as soon as possible. Air Sahara launched operations on the route in January but suspended the services in June because Jet, which also operates Delhi-London flights, was planning to use the 767 for a new Amritsar-London route.
Jet shelved plans to operate on the new route after the deal collapsed, citing a capacity shortage, although it later revived them to begin flying the route in August.
Jet has insisted it was within its rights to walk away from the Air Sahara agreement, saying it acted "entirely on sensible commercial and legal advice received by it". ■
This month's Feedback on page 106 examines the implications of the failed Jet-Air Sahara merger in more detail.
Source: Airline Business
