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January 19, 2006 02:40 AM ET Jet Airways to Buy Rival Air Sahara
NEW DELHI (AP) - India's leading private carrier Jet Airways said Thursday 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 Wednesday, paving the way for a strategic alliance between the two carriers initially and a full fledged merger eventually, said Jet spokeswoman Nandini Verma.
Air Sahara, a family-run company that is not publicly listed, has been losing money and is estimated to have piled up 6 to 7 billion rupees (US$120 million) in debt. It was not immediately clear if Jet would take over Air Sahara' debt as well.
But investors seemed to welcome the news, with Jet Airways' shares opened stronger Thursday, rising 2.6 percent to 1,158 rupees (US$26) in early trading.
The merged entity will control more than 50 percent in India's aviation market.
The company also filed a notice of the deal to the Bombay Stock Exchange, and said it's board had approved the acquisition.
Jet Airways' chairman, Naresh Goyal, called the deal "a total takeover."
In 2005, 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 in 2005, up 3.5 percent on year. 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 began in the early 1990s.
The competition has brought down fares and in the process attracting more passengers. Aviation officials expect the number of fliers to grow from around the current 20 million a year to some 50 million in 2010.
The Jet-Sahara deal appeared to be a "win-win" for both airlines.
It makes Jet the leader in the Indian aviation and provides the airline with access to more international destinations and greater infrastructure including more parking bays and hangers at domestic airports.
The deal also helps the Sahara group, a leading business conglomerate with interests in financial services, publishing and real estate, exit the airline business on good terms.
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