• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

India Airline Merger Deal Falls Through

Posted on: Thursday, 22 June 2006, 03:00 CDT

By RAJESH MAHAPATRA

NEW DELHI - A $500 million merger deal between India's leading private carrier Jet Airways and rival Air Sahara has fallen through, airline officials said Thursday, hours after a deadline to get regulatory approvals lapsed.

The deal, which would have created the country's largest airline controlling nearly half of India's aviation market, was supposed to have been concluded Wednesday.

But it collapsed due to a combination of procedural delays and disagreements between the two airlines.

As the deadline neared, Air Sahara sought to extend the process by 15 days as some regulatory approvals were delayed, said Air Sahara President Alok Sharma.

But Jet Airways said it would agree to an extension only if the $500 million price it would pay was cut by 10 to 20 percent, Sharma said. "We rejected the proposal," he said.

Jet officials could not be reached for comment. The company was expected to inform the stock exchange about the deal's status later Thursday.

Technically, the deal could not be finished by the Wednesday deadline because the government delayed in approving the appointment of Jet Airways Chairman Naresh Goyal to the board of Air Sahara after its acquisition.

Government approval of appointment to the boards of companies offering airline and telecommunication services were made mandatory after these sectors - described as of strategic interest - were opened to foreign investment in recent years.

But media reports have said Jet was using the delay in regulatory clearances as a pretext to wriggle out of the deal, which most analysts said was overpriced.

Jet shares had plunged about 50 percent since the deal was announced on Jan. 19. But in early trading Thursday, the stock rose 3.8 percent to 730 rupees.

Meanwhile, a court in the northern Indian city of Lucknow, the headquarters of the Sahara group that owns Air Sahara, issued an order Wednesday freezing a bank account that was set up with advance money paid by Jet Airways.

Sharma said the group was prepared to run the airline as it operated before the merger deal was signed. Jet officials have been managing Air Sahara's fleet of 27 planes since Jan. 19.

Jet's own fleet include 52 aircraft, mostly Boeing planes.

Source: Associated Press/AP Online

More News in this Category