Jet says it will run Air Sahara separately and will rebrand it as Jetlite. It will be positioned between full-service carriers including Jet and no-frills operators that have been winning market share.
The new Rp14.5 billion ($340 million) takeover was agreed in early April as final arbitration hearings over last year's aborted deal were due. Analysts believe Jet Airways feared losing the arbitration case, forcing it to cut its losses by reviving takeover negotiations.
Jet, India's largest privately owned airline, agreed in January 2006 to buy Air Sahara from the Sahara Group for $500 million. But the deal collapsed after government approval was not secured by a closing deadline of midnight on 21 June and Jet opted not to extend the completion date.
Sahara accused Jet of improperly walking away from the deal, saying the larger airline had tried to renegotiate the purchase amount in the weeks leading up to the June deadline. Both sides then turned to the courts seeking possession of Rp15 billion deposited by Jet into an escrow account for the acquisition. Jet also sought to get back funds it gave to the Sahara Group as an advance payment. In October an arbitration panel was set up to hear the dispute.
Some analysts say Jet is still paying far too much, but Jet claims such suggestions are "ill-informed". It says: "The renegotiated purchase price represents a significant discount to the earlier price and will enable Jet to get an incremental market share at a much lower price."
Air Sahara and Jet have extensive domestic networks and have been expanding internationally. But they face intense competition from new domestic players and have been losing market share at a rapid rate (see chart). Analysts predicted last year the planned merger would lead to more consolidation, as most carriers are losing money, but this has yet to come to the Indian domestic market. But state-owned Air-India and Indian Airlines are being prepared for a merger to turn them into one true "network carrier" and allow them to better compete with Jet/Air Sahara.
Source: Airline Business
