New Delhi: Jet Airways has announced that it has re-branded Air Sahara as Jetlite and that this loss-making airline would now be positioned between discount and full service carriers. Jet also said that its takeover of Air Sahara would not strain cash flows, and that it expects the loss-making airline to return profits from its first year of operations.
Jet last week agreed to buy Air Sahara for 14.5 billion rupees (USD$347.3 million), at a price that it claims is about 34 per cent cheaper than a deal it had struck earlier.
Jet chairman, Naresh Goyal, said that the two airlines would have a combined fleet of 87 aircraft, likely to grow to 120 planes in two years. The two airlines will also have combined net revenue of more than $2.5 billion by the end of the fiscal year to March 2008, he said.
"We understand the difficulties in the market, like poor infrastructure and manpower issues, and we are also seeing full-service carriers lose traffic to low-cost carriers," Goyal said at a conference to launch a new corporate identity for Jet. "But we will be able to cut costs because of our synergies."
The two airlines will aim for annual growth of about 15 per cent, even though the domestic market is growing faster, he said. "We want to grow at a steady rate... we are more interested in profitability and managing margins than market-share."
Jet returned to profit in its fiscal third quarter to end-December after losses in the previous two quarters. India's domestic aviation market is forecast to grow at more than 20 per cent a year until 2010. Jet Airways currently commands about a third of the domestic market.
Jet also has plans to raise up to $400 million in the next few months to fund its international expansion plans, according to Jet officials. Separately, Jet will also be looking at various options to fund the immediate working capital requirements to overhaul Sahara.
Jet is due to take delivery of 20 wide-bodied aircraft between April and October 2007, and 10 Boeing 787 Dreamliner aircraft between July 2011 and December 2012. It will also negotiate better prices for the 10 Boeing 737-800 aircraft that Sahara ordered last year, Goyal said.
Both Jet and Sahara are eligible to fly to the Gulf from early 2008, and Jet said that it expects to add destinations including Dubai, Muscat, Doha, Bahrain and possibly Saudi Arabia.
Jet also said that it would launch a cargo airline and a maintenance, repair and overhaul facility later this year, as planned.