Airlines Deals

Capt. Werner Borchert has been appointed as Vice President - Flight Operations of Jet Airways (Q, N,C,F)* India.

Borchert comes with over 20 years of international experience in the airline business. In his last assignments Capt. Borchert was VP-Operations & Technical in Etihad and Sr. Vice President - Operations in LTU International Airways.

Further, the company also disclosed that Rajesh Verma, Vice President - Customer Services & Inflight has resigned from the services of the company.

Jet had recently filed a transfer petition before the Supreme Court in connection to the Rs 23 billion Jet-Air Sahara deal. The airline commenting on failure of the deal, partly blamed the government`s unclear policy on airline mergers and acquisitions for its decision not to extend the time-limit of the share purchase agreement to acquire Air Sahara.

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Air Sahara has asked Ernst & Young to review the current business plan of the airline to revive the business and regain lost market share. After the failure of the much talked Rs 23 billion acquisition deal between Jet-Sahara, the Lucknow based-airline is exploring private equity placement routes to infuse fresh capital of USD 100 million, that will fuel revival plans, reports Business Standard.

Air Sahara President, Alok Sharma stated that the airline needs to bring our passenger back to airline. He said that the company has asked the Ernst & Young to revisit the current business plan in the changed scenario and the new business plan will advise the airline about raising fresh capital. Further, it will guide the airline about the fund required to raised and various routes of fund raising, Sharma added.

Admitting that airline had lost several employees including engineers and pilots, Sharma said Air Sahara has made alternate arrangement to fly aeroplanes.

Significantly, Air Sahara has re-launched one of its competitive schemes `Sixer in Air`, offering six economy flight coupons worth Rs 26,00 for travel on any domestic sector up to September 30.

The scheme `Sixer in Air`, which is inclusive of taxes, would imply that each ticket would cost Rs 3,808 plus taxes compared with a range of Rs 4,775-Rs 5,335 being offered by other full-service carriers.

The airline has also announced a new low economy class fare of Rs 8,500 plus taxes on its Delhi-Singapore-Delhi sector.

The airline President indicated that the airline plans to taking two Boeing 737-800 aircraft in the month of August and September. Two more aircraft will join our fleet in the month of January and February. With that Air Sahara will have a fleet of 32 aircraft by February 2007.

This is in addition to airline`s original plan to acquire 10 aircraft, he added. Currently, Air Sahara has a fleet of 27 aircraft including new generation Boeing aircraft and seven CRJ-200s. The airline has also four helicopters, which provide charter services.

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Day Five of torrential rains in Mumbai brought some respite for air travellers, as most had to only cope with weather related delays at the Chhatrapati Shivaji International Airport—starting with hour-long delays in the morning.

But airline schedules were severely affected with the closure of the main runway 09-27 for two hours, due to urgent repair work.

‘‘Urgent maintenance work was done on runway 09-27 at the Chhatrapati Shivaji International Airport on Wednesday between 2.01 pm and 4 pm,’’ read an statement issued by the Mumbai International Airport Pvt Ltd—the joint venture company tasked with the modernisation and upgradation of the airport.

‘‘Because of the incessant rains, portions of the runway had come undone with loose gravel seen on the tarmac,’’ said an airport source.

Urgent patchwork had to be immediately carried out, which necessitated the runway closure, as gravel may result in foreign object damage to an aircraft, the source explained.

However, the secondary runway 14-32 was made available to operators, the MIAL release added. But with the exception of Air Sahara and Kingfisher, other airlines didn’t use the same because of poor visibility and higher minima required for take-off and landing.

Despite the odds, over 95 per cent domestic flights operated from Mumbai—Indian had no cancellations, but combined three flights on the Goa, Delhi and Bangalore sectors. Newer entrants Kingfisher, SpiceJet and GoAir—they have fewer daily frequencies—also operated all Mumbai flights.

While Air Deccan and Air Sahara had five and three cancellations respectively, Jet Airways cancelled a Porbunder flight, in addition to clubbing flights on the Bangalore sector. Meanwhile, Airport Director R J Treasuryvala refused comment.

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Air Sahara on Tuesday, announced a new low economy class fare of Rs 8,500 plus taxes on its Delhi-Singapore-Delhi sector.

The fare on business class is Rs 42,665 plus taxes. Passengers must book by July 15 and travel must start by July 31. The maximum stay allowed under this fare is for 20 days.

Air Sahara’s fleet includes new generation Boeing 737-700, 737-800 and classics 737-300 and 400 aircrafts besides seven CRJ-200s. The fleet also includes four helicopters, which provide charter services.

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In its bid to regain the lost ground, Air Sahara on Wednesday said it would re-start its Delhi-London fights from July end and explore possibilities to mount flights to more international destinations.

“From the third week of July we will be re-starting our Delhi-London flights. We will fly four times a week,” Air Sahara president Alok Sharma told reporters here. The airline would utilise the leased wide-bodied A-340 aircraft, which had been returned by Jet Airways after a takeover deal between the two private carriers collapsed, for its Delhi-London service.

Mr. Sharma said the airline would pull out all the stops in order to regain the lost share during the six months period that Air Sahara was under the control of Jet Airways. He said the airline was exploring more international destinations and Thailand was the next place where it intended to fly.

He said Air Sahara was “revisiting” its relationship with its financial consultant Ernst & Young after the recent developments. The two companies would have a re-look at the working relationship and how best to prepare for future businesses, he added.

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Jet Airways, Air Sahara and the Indian set to hike ticket prices

Air travel is going to get more expensive in the Indian market as Jet Airways, Air Sahara and the Indian have announced the imposition of a revised fuel surcharge of Rs 500 from July 7.

This would hike the prices of tickets on all the domestic routes for these three airline companies. The problem is the rising price of aviation fuel. These new hikes would be applied on business and economy class tickets on all domestic routes.

The hikes are applicable on all tickets purchased within and outside India. However, they have said that the tickets purchased on or before July 6 would be exempt from the increased prices.

Jet Airways added that its Jet Privilege redemption tickets would be exempted from the fuel surcharge.

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With its Rs 2,300 crore takeover deal with Jet Airways falling through, Air Sahara today announced the re-launch of one of its competitive schemes, offering six economy flight coupons worth Rs 26,000 for travel on any domestic sector up to September 30.

The scheme ‘Sixer in Air’, which is inclusive of taxes, would imply that each ticket would cost Rs 3808 plus taxes compared with a range of Rs 4775-Rs 5335 being offered by other full-service carriers, the airline said in a release.

However, flights on two sectors — Delhi-Dibrugarh and Delhi-Cochin — would entail two tickets instead of one for other sectors.

The scheme is open for sale till July 15, after which the fare would be revised to Rs 31,500, inclusive of taxes and surcharge.

Soon after the deal collapsed on June 21, Air Sahara had said it would launch services on its own.

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Unconvinced by Jet Airways’ claims to get back Rs 500 crore paid as advance for Air Sahara’s takeover, legal experts say it will be difficult for country’s largest airline to prove its case.

“It would solely depend on the outcome of the arbitration and who receives how much from the escrow account,” senior Supreme Court lawyer Lalit Bhasin said.

Bhasin, who specialises in corporate affairs, said it would not be easy for either of the two to recover the amount from the ICICI bank (the escrow account holder).

Jet, which has already lost Rs 100 crore as ‘commitment fee’, in a petition filed in Supreme Court, had argued that as per the Share Purchase Agreement, Sahara was bound to return Rs 500 crore within a week if the deal collapsed.

However, Bhasin said this condition may apply only if both parties were held responsible for the deal’s failure. But as both were blaming each other for failure, the money could even be divided, he said.

Diljeet Titus, another corporate lawyer, is of view that Sahara has more valid points than Jet Airways.

“Jet cannot complain it did not know the internal mess in Sahara Air. Sale of Sahara was an open bid and included its assets and liabilities. It was well evaluated by Ernst & Young a firm of international repute,” he said.

Legal experts also differ on the duration in which Jet and Sahara could withdraw money from the escrow account, as the matter has become complex and both sides filed petitions in various courts.

Supreme Court lawyer Atul Sharma, who handles the case of Reliance Airport Developers against the award of Delhi airport to GMR, said it would take at least one year.

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New details emerged regarding the failed merger of Jet Airways and Air Sahara (ATWOnline, June 23) as the legal fight between the carriers escalated and may be headed for India’s Supreme Court.

In an extensive interview with India’s Financial Express, Air Sahara President Alok Sharma claimed Jet wanted to cut its $500 million acquisition price by 10%-20%, which Air Sahara “summarily rejected,” effectively killing the deal.

“The main reason behind the breakup is Jet Airways’ financial crunch,” Sharma said. “They told us, ‘Look we have a problem. We are facing a financial problem and we want you to take a cut of 10%-20%.’ We summarily rejected that.” He added that Sahara was “not willing to compromise on price” and offered an extension beyond the June 21 deadline for completing the takeover, but Jet decided to let the deal expire. “I don’t blame Jet, as I understand their market valuation has gone down in recent months, but we cannot suffer with them,” Sharma said.

Jet Airways said yesterday it was filing a petition with India’s Supreme Court to transfer to the high court all lower court cases revolving around the failed merger, including a disputed $108.5 million escrow account.

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Breaking the silence on collapse of the Rs 2,300 crore deal to acquire Air Sahara, Jet Airways today said the decision not to salvage the pact was purely on ‘commercial considerations’ and that it was moving the Supreme Court for transfer of litigation in different courts.

Terming the controversy as “unfortunate,” Naresh Goyal- controlled Jet indirectly hit out at Sahara saying that it was forced to clarify its position due to “inaccurate statements made by vested interests”.

“There is nothing more to the actions of the Parties (of not seeking extension of Share Purchase Agreement) beyond commercial considerations,” Jet said a week after the deal fell through, leading to acrimony and legal battle between the two airlines, whose proposed merger was touted as the biggest aviation deal in India.

Goyal, who has been in London even prior to the collapse of the deal, is talking to top most layweyers to handle the resultant situation.

“A transfer petition is being filed by Jet Airways before the Supreme Court,” it said, adding that litigations have ensued after the expiry of the agreement on the midnight of June 21, and proceedings are pending in the Bombay High Court (initiated by Jet) and Lucknow courts.

Sources in the know said that Jet would possibly move the Supreme Court tomorrow.

Stating that “time limits” in the Share Purchase Agreement expired before the ‘conditions precedent’ were met, Jet said in a statement: “For commercial reasons, and in the interest of Jet Airways, and its family of shareholders, the management decided not to extend the time.”

Alleging that Jet had terminated the contract, Sahara had moved the District Court in Lucknow on June 22 and sought an interim stay on operation of the escrow account and followed it up with another injuction on the sale of share pledged by it to Jet for an advance of Rs 500 crore. The issue is comming up for hearing on June 30.

While Sahara officials were not immediately available for comments, Jet said in the statement that it was constrained to clear the air by clarifying its position in the matter in view of reports based on “inaccurate statements made by vested interests.

Meanwhile, Air Sahara officials were closeted with their legal advisers to evaluate and prepare their response to Jet’s plans to move the apex court.

On June 23, the Lucknow district court had extended the interim order freezing the escrow account and restrained Jet from selling Sahara’s shares worth Rs 500 crore.

Senior advocate Abhishek Singhvi, appearing for Jet, had contended that since the petition on the issue was filed by Naresh Goyal-promoted airlines before the Bombay High Court, the Lucknow court had no jurisdiction to entertain Sahara’s petition.

However, Sahara’s counsel Dushyant Dave opposed argument on maintainability of its petition, saying that the deal was signed in Lucknow and as such the court here has full jurisdiction on the issue.

In its statement today, Jet said the share purchase agreement between it and Air Sahara was based on certain precedent conditions being satisfied before the due date of June 21.

“These conditions related to some permissions being given by the Government of India as well as certain policies relating to mergers and acquisitions of airlines being in place,” the Jet statement said.

Referring to the issue over the delay in getting security clearance of its chief Goyal, which raised questions over the “credentials” of the management, Jet said: “The latest communication by the Government of India has laid the controversy to rest — nothing more needs to be said.”

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