The Hindu Business Line : Sahara not to be Jet Air's low-cost arm: Goyal

The Chairman of Jet Airways, Mr Naresh Goyal, says that they are not planning to position Air Sahara as a low-cost arm of Jet, and the Air Sahara employees will be absorbed on a merit basis only. He adds that they will assign a management team to review Air Sahara's existing deals. No liability will come on Jet's balance sheet, he says.

Mr Goyal further adds that, international flight rights transfer is subject to regulatory approval.

Excerpts from an interview with Mr Naresh Goyal.

Tell us about the Sahara acquisition.

We have valued the whole enterprise at $500 million and it is subject to all regulatory approvals.

What are the liabilities of Sahara and the assets acquired?

We are not getting into any liability. We all know there is infrastructure problem. We are getting the parking slot and whatever facilities they have in different airports in the country. All this will again be subject to regulatory approvals. Once we get this, later we will take pilots, some of the technical people and the cabin crew. In this business, besides the aircraft, one needs infrastructure facilities, which one cannot do without. We will get that as well as some manpower from them.

Will the deal enhance shareholder value?

This has been done after a careful study. It is important to give maximum value to the shareholders. This deal will give us economy of scale because today any business is on very small margins so our revenues will improve and overall profitability will improve and so naturally shareholders will benefit.

What are the operational synergies? Will Air Sahara become a low cost arm of Jet Airways?

We are not planning to make it a low-cost airline. In India, there is nothing like low cost airlines. All the airlines are paying for the same charges at the airport, navigation, landing, etc.

On flights to the US, is there any problem?

We have no problem with the US Government. They had written to the Ministry of Civil Aviation. You can check this with the Ministry. It has sent positive response that we have been designated. Hence, there is no problem but I think the reply has to go to the External Affairs Ministry. As far as Jet is concerned, we have all the security clearances.

What is your market share?

Jet Airways had a 46 per cent market share. Our market share went down because of the number of carriers that came in and at the same time we lost a few of our pilots. Due to safety, we did not want to push anyone, who has less experience, so we cut our capacity to about 20-22 per cent last month. Now, we have a lot of pilots from overseas, so our business will be normal. So, the market share, which went down to 35 per cent, with Sahara, it will soon go up to 40-41 per cent of a bigger market.

Will the international flying rights also get transferred?

All that is subject to Government approval. We will be applying to the authorities. The total takeover is 100 per cent and we will are valuing it at $500 million. We will also be taking 100 per cent equity of Sahara Airlines.

What is the status of Government approvals?

The Government has an open sky policy, which I have always welcomed and I still welcome it. It is a very good policy. How are you going to raise funds?

We have enough cash flows. We have done an IPO, so we have enough money.

Are you going to absorb the entire staff?

No we are not absorbing the entire staff. We will be taking pilots; there is a shortage of pilots, which will help us. We will be taking technical, engineering, mechanical staff; again there is a shortage of technical people. We will be taking some cabin crew depending on their merits. Everything will be done on the basis of merit.

What will happen to agreements that Air Sahara has with other airlines within the country and outside. Would you continue with those agreements?

We will be putting our management team to look at what is good for Jet Airways, what is good for the consumers, we will see which agreements are good and which agreement needs to change.

What happens to the Indian cricket tickets?

We have nothing to do with cricket. That will be dealt by their other companies, and not passed on to Jet Airways.