JET Airways is planning to run Air Sahara operations as a separate debt-free company without integrating the two balance sheets. The Lucknowbased Air Sahara will, however, be rebranded and operated most likely as a low-cost airline within a few months. The Jet management is currently working on plans to invest about Rs 100 crore as capital or loan to Air Sahara, once the acquisition is completed on April 20. An additional amount of about $100 million will be raised eventually, most likely through a private placement of equity for the new company, sources close to the airline said. An official e-mail sent to Jet Airways on the issue remained unanswered. It makes sense to run Air Sahara as a separate operation because the company will have no major cost head except operating spends like salaries, the sources said. Senior management from Jet Airways will help run the airline operations. The airline already has a debt-equity ratio of over two and has plans to raise money for an Rs 8,000-crore aircraft acquisition programme. Route planners with Jet Airways are already reworking the airline’s entire domestic schedule to plan a completely new integrated operation, so as to optimise the induction of new capacity through Air Sahara’s 24 planes that will be added to Jet’s fleet by this month-end.
Jet revving up for revenue on Gulf route
THE airline will also be used to operate a low-cost service on Gulf routes, currently a money-spinner for the public sector trio of Indian, Air India and Air India Express. As part of the deal to buy Air Sahara, the Jet Airways management will get a certificate of positive net worth for Air Sahara as on March 31, ‘07 from the Sahara group. This would certify that the airline’s cash and bank balances are equivalent or greater than the bank loans taken by it, the sources said. No group company loans will be on Air Sahara books. Air Sahara’s brought-forward (unabsorbed) business losses of about Rs 500 crore will be adjusted by Jet for tax benefits. The airline made a net loss of Rs 60 crore for the nine months ended December ‘06. The Jet Airways scrip closed at Rs 626 on the BSE on Friday, down almost 3%. Jet Airways and Air Sahara are the only two private airlines with permission to fly to the Gulf from January 2007. “The price-sensitive market can be easily served by an efficient airline with aggressively priced seats,” says an airline official. The government airlines currently control roughly 50% of the India-Gulf traffic, which, to a large extent subsidises their losses on other routes. The ministry of civil aviation had earlier imposed a three-year ban on private airlines flying to the lucrative Gulf routes. The idea was to give state-owned airlines a headstart so they can recover the losses from their public support services. From 2007, the market from India will thus turn into a duopoly with the merged entity Air-India-Indian-Air India Express and Jet-Sahara operating on it.
Courtesy: EconomicTimes
JET Airways is planning to run Air Sahara operations as a separate debt-free company without integrating the two balance sheets. The Lucknowbased Air Sahara will, however, be rebranded and operated most likely as a low-cost airline within a few months. The Jet management is currently working on plans to invest about Rs 100 crore as capital or loan to Air Sahara, once the acquisition is completed on April 20. An additional amount of about $100 million will be raised eventually, most likely through a private placement of equity for the new company, sources close to the airline said. An official e-mail sent to Jet Airways on the issue remained unanswered. It makes sense to run Air Sahara as a separate operation because the company will have no major cost head except operating spends like salaries, the sources said. Senior management from Jet Airways will help run the airline operations. The airline already has a debt-equity ratio of over two and has plans to raise money for an Rs 8,000-crore aircraft acquisition programme. Route planners with Jet Airways are already reworking the airline’s entire domestic schedule to plan a completely new integrated operation, so as to optimise the induction of new capacity through Air Sahara’s 24 planes that will be added to Jet’s fleet by this month-end.
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