Jet-Sahara merger extended by three months

24 March 2006

After hectic discussions involving top executives of both the groups, Jet Airways and Air Sahara have decided to extend the validity of the merger agreement by another three months. The extension follows intense speculation about a re-negotiation of the agreement or even a call-off of the merger plans.

Over the next three months, the airlines are expected to work together to get the requisite clearances from the Director General of Civil Aviation (DGCA) for transfer of Air Sahara''s airport infrastructure rights to the merged entity. The two airlines are also expected to respond to the notices issued by MRTPC on concerns that the merger would create a near monopoly.

Both groups have maintained that the enterprise value of Air Sahara would be kept unchanged at $500 million. Naresh Goyal of Jet Airways mentioned to a television channel that his airline would pay an advance of Rs500 crore to Air Sahara over the next three months. He confirmed that Jet has already paid Rs100 crore to Sahara.

Goyal insisted that the advance would be refunded without interest in case the merger is called off. Jet would be making the advance against 100 per cent shares of Air Sahara.

The escrow account opened by Jet Airways to make payments to Air Sahara for the acquisition is due to expire today. The account is expected to be renewed for another three months.

Both airlines are understood to have requested the government to come out with specific guidelines for sharing of airport rights in the case of a merger between two airlines.