SAHARA to be A LOW-COST FLIER ,Jet-Sahara deal still stuck on the runway
LEGAL proceedings on the Jet-Sahara rapprochement continued through Wednesday but both sides failed to reach a conclusion. The airlines have asked the arbitration tribunal for more time, to prepare a consent order that will be presented for approval. The revised contract for the biggest buyout in Indian aviation industry is expected to be signed over the next few days. Meanwhile, even as talks between the airlines continued, the Jet Airways scrip took a sharp knock on the bourses today, falling by Rs 36 to close at Rs 608. Aviation sources said Jet would possibly launch the Air Sahara operation as a separate low-cost airline under a new brand. The Air Sahara aircraft are unlikely to be used as a part of Jet’s full service offering, because they are much older planes compared with Jet’s fleet. Also, the Air Sahara management has gradually converted most of the fleet to a single-class configuration, by removing the business class seats from the planes. The airline had also begun pricing tickets very aggressively, competing more with LCCs than with fullservice carriers. Jet Airways is stuck with the planes because they are on long-term leases which cannot be terminated without penalty payouts. Jet Airways sources refused to comment on the possibilities or on the deal and said the matter is still sub judice.
NO TAX BREAKS
JET AIRWAYS’ buyout of Air Sahara would not get tax concessions provided for the merger of Indian with Air-India. The tax package was specific to merger of the two state-run airlines and it was made clear at that time that it would not be available to other M&As, sources said. A carry-forward facility on the lines provided to PSU merger would have helped Jet to set off unabsorbed losses against future profits.
Differences crop up over payment duration in Jet-Sahara deal
THEstock market has interpreted the Air Sahara takeover as a positive development for the other LCAs since they will now have less competition. Shares of Air Deccan and SpiceJet rose on the BSE on Wednesday. The SpiceJet stock rose 10% to close at Rs 48.60 while the Air Deccan stock went up 2% to close at Rs 94. Meanwhile, sources close to the deal said that differences seem to have cropped up between the companies over the issue of duration across which the full payment for the deal has to be made. While Jet is ready to pay Rs 400 crore upfront in cash, it is pressing for the remaining payment — of Rs 550 crore — over two to three years. The Sahara group wants to conclude the deal over the next one year, sources said. Even if the group agrees to a long drawn out payout, there will be clauses inserted to safeguard the cash flow, sources said. Legal experts from both sides will resume their discussion on Thursday. The deal will be officially announced only after getting legal stamp of approval, sources said. “The arbitration panel has to be fully convinced about the new contract and the seriousness of the players that they will abide by it before they give their approval,” sources added.
Courtesy: EconomicTimes
NO TAX BREAKS
JET AIRWAYS’ buyout of Air Sahara would not get tax concessions provided for the merger of Indian with Air-India. The tax package was specific to merger of the two state-run airlines and it was made clear at that time that it would not be available to other M&As, sources said. A carry-forward facility on the lines provided to PSU merger would have helped Jet to set off unabsorbed losses against future profits.
Differences crop up over payment duration in Jet-Sahara deal
THEstock market has interpreted the Air Sahara takeover as a positive development for the other LCAs since they will now have less competition. Shares of Air Deccan and SpiceJet rose on the BSE on Wednesday. The SpiceJet stock rose 10% to close at Rs 48.60 while the Air Deccan stock went up 2% to close at Rs 94. Meanwhile, sources close to the deal said that differences seem to have cropped up between the companies over the issue of duration across which the full payment for the deal has to be made. While Jet is ready to pay Rs 400 crore upfront in cash, it is pressing for the remaining payment — of Rs 550 crore — over two to three years. The Sahara group wants to conclude the deal over the next one year, sources said. Even if the group agrees to a long drawn out payout, there will be clauses inserted to safeguard the cash flow, sources said. Legal experts from both sides will resume their discussion on Thursday. The deal will be officially announced only after getting legal stamp of approval, sources said. “The arbitration panel has to be fully convinced about the new contract and the seriousness of the players that they will abide by it before they give their approval,” sources added.
Courtesy: EconomicTimes
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