Date:22/03/2006 URL: http://www.thehindubusinessline.com/2006/03/22/stories/2006032202840100.htm

Back No clarity on Jet-Sahara issue

Our Bureau

New norms for transfer of assets in aviation M&A coming

Cross-flying
Jet Airways indicated that the deal had fallen through.
Sahara Airlines maintained that "work was still going on.''

New Delhi , March 21

The fate of the buyout of Air Sahara by Jet Airways hangs in the balance even as the Government works on guidelines for transfer of assets between airlines going in for mergers and acquisitions.

Though officially both airlines maintain that the deal is on track, sources gave completely divergent views. Jet Airways indicated that the deal had fallen through and it was a matter of time before this was made public. Sahara Airlines, however, maintained that "work was still going on'' and that they would not have anything to say till March 24 when the 65-day deadline for the escrow account to remain valid is to end.

Aviation industry sources who are in the loop on the developments also added that apart from the lack of clarity on getting landing and parking rights, Jet Airways on inspection found that the quality of assets of Sahara Airlines was not as expected and there was a view that it would be prudent to exit the deal, thereby losing only a few hundred crores instead of paying the entire Rs 2,217 crore for the whole deal.

There were also some indications that Jet had attempted a re-negotiation but Sahara was firmly against it.

New guidelines

Meanwhile, with mergers and acquisitions becoming a global phenomenon, the Ministry of Civil Aviation plans to soon firm up guidelines for transfer of assets. "The guidelines will be clear on asset transfer. In the aviation industry, acquisition and merger are happening in India only now. The economies of scale of the airlines in India need to be big and therefore there will be more M&A for which we should have some guidelines," said a senior Government official, without specifying any time frame when the guidelines would be out. The proposed guidelines, however, would not form part of the civil aviation policy that is to be finalised by next month, officials said.