ATW Daily News

Jet Airways-Air Sahara deal falls through

Friday June 23, 2006

Five months after sealing a merger that would have created an airline with control of nearly half the Indian market, Jet Airways and Air Sahara have parted ways in acrimonious fashion and will head to court.Neither carrier issued a statement, but press reports from India said that Jet, which agreed in January to purchase its rival for $500 million (ATWOnline, Jan. 20), pulled out of the deal after struggling Air Sahara refused to renegotiate for a lower price ahead of Wednesday night's deadline. One report suggested Jet wanted to cut the purchase price by 20%-25%.

Air Sahara reportedly holds a 9%-13% market share, while Jet has 35%. Analysts were quoted as saying Jet would have had to pour too much money into the smaller carrier to turn it around. The airlines have filed lawsuits against each other to prevent the withdrawal of money placed into a common account, The Times of India reported.

"From Thursday, we are going to run our airline as if there had not been any deal," Air Sahara President Alok Sharma told The Hindu. "It is our firm belief that we will be able to run the airline as we have been doing over the past 13 years."

Jet had been running a significant part of Air Sahara's operation since April, but according to NDTV Profit, Air Sahara lost INR1.64 billion ($35.6 million) in the two months following the January deal and doubled its liabilities in the five months prior to the signing to INR4.43 billion. Discrepancies between its numbers and those reached by Jet and its auditors, Ernst & Young, added to the difficulties. The carriers continued to trade barbs on a variety of issues in the press late yesterday.

by Brian Straus

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