Jet-Sahara deal gets a leg-up with airline merger policy notification

The civil aviation ministry yesterday notified guidelines for use of airport infrastructure in case of mergers / takeovers of airlines and sale / transfer of aircraft. The guidelines would be applicable in the case of all mergers and acquisitions between airlines and acquisition of aircrafts by an airline from another airline.

The aircraft acquisition committee (ACC) of the ministry of civil aviation, had in its meeting held on March 28, 2006 considered the issue of policy on transfer of airport infrastructure in case of mergers / take overs of airlines, which has been accepted by the government.

As per the guidelines, the acquirer of an airline or aircraft would receive only user rights which are given on a non-payment basis like parking slots and landing rights. For all other rights, the terms of lease / sale agreement between the airport operator and airline will apply.

The acquirer would get airport rights only on actual user basis. In other words, those rights which are not under actual use by the airline operator would be taken over by the government or airport operator. This would also mean that the acquirer cannot transfer the rights alone, without the aircraft, to a third party.

The guidelines would speed up the post-acquisition integration of Jet Airways and Air Sahara. Jet''s $500 million acquisition of Sahara was facing regulatory hurdles as no clear guidelines were in place when the deal was announced.

Sahara is currently a fully owned subsidiary of Jet Airways. Jet''s application to the civil aviation ministry for the transfer of ownership of Sahara from the Sahara group to Jet is yet to get formal approval, according to some reports. With the new policy in place, the ministry is expected to grant its approval very soon.