Jet Airways' Attempted Acquisition of Air Sahara
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Case Code: BSTR219 Case Length: 19 Pages Period: 2005-2006 Pub Date: 2006 Teaching Note: Not Available |
Price: Rs.300 Organization: Jet Airways (India) Ltd, Sahara Airlines Ltd Industry: Aviation Countries: India Themes: - |
Abstract Case Intro 1 Case Intro 2 Excerpts
"I believe that it is a good sign for the Indian aviation industry. This consolidation will lead to route optimization and rationalization."
- Siddhant Sharma, CEO, SpiceJet, commenting on Jet Airways' acquisition of Air Sahara in 2006.
"It makes good business sense for Jet, but there is a shortage of infrastructure in India, so allocation (of parking, landing, and take-off slots) has to be fair so low-cost carriers are not disadvantaged further."
- Jeh Wadia, managing director, GoAir, commenting on Jet Airways' acquisition of Air Sahara in 2006.
Jet Airways Spreads its Wings
On January 19, 2006, Jet Airways (India) Ltd. (JA) announced its decision to acquire Air Sahara (AS), the third largest airline company in India. It was to be the first acquisition in the history of Indian aviation industry. The deal valued at Rs.22.5 billion approx. ($500 million) was expected to enable JA, a leader in the airline industry, to further strengthen its position in the market.
With this acquisition, the company would have close to a 50 percent share of the Indian aviation market. In addition, the company would add aircraft, acquire more parking slots, more airline staff, and more international routes. The announcement of the deal received a mixed response.
Some of JA's competitors complained about the possible monopoly that JA would have on the limited infrastructure available at most Indian airports. Some analysts believed that the Indian airline industry as a whole would benefit from the deal, as it would reduce duplication of routes and lead to less fragmentation of the full service segment.
Others believed that the price paid was too high, considering the fact that AS was a loss-making airline company (Refer to Table I for financials of both the companies). The deal was also opposed by some members of the Indian Parliament, who believed that the acquisition could lead to the creation of a 'monopoly entity' in the Indian airline industry. Naresh Goyal, chairman, JA, responding to some of these concerns, said, "The deal has been done after doing thorough due diligence. The acquisition will give us economies of scale and will help improve revenues."....
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