Jet-Sahara deal gets government nod

31 March 2006

The aircrafts acquisition committee of the central government is understood to have cleared the Jet-Sahara merger deal during a meeting yesterday. The committee, with representatives from DGCA, Airports Authority and ministry of civil aviation, is the apex decision making body on regulatory issues concerning the civil aviation sector.

Sahara''s aircrafts, flight operating rights, landing rights and parking lots at various airports can now be transferred to the merged entity. However, Jet cannot sell or lease out any of these rights or lots to another operator.

The acquisition of Sahara by Jet had run into difficulties because of the delay in getting regulatory approvals. The office of the DGCA was not supportive of transferring all the Sahara properties to the merged entity on concerns of stifling competition in the sector. Other airline operators had also objected to the transfer of assets.

The managements of both airlines had earlier this month decided to extent the validity of the share purchase agreement by 90 days. With the government approval in place, the merger is now expected to go through smoothly.

While working on the regulatory approvals, Jet is clearly re-defining the strategy for Air Sahara. Air Sahara has substantially dropped the fares in some sectors yesterday. The new fares in some sectors are even lower than those offered by low-cost carriers.

Earlier, the Jet management had categorically stated that Sahara would not be converted into a low-cost carrier to compete with the new entrants and would continue as a full service airline. It remains to be seen whether Jet would merge Air Sahara with itself, as indicated earlier, or convert it into a low cost subsidiary.