The Hindu Business Line : `Jury still out on price Jet paid for Sahara'

Chennai April 20 Jet Airways has paid Rs 400 crore to Air Sahara's promoters and closed a deal that took off only days back, after much taxiing around for almost a year. The skies should see Jetlite soon, but the air is laden with some weighty questions about the deal, such as: Was it a smart transaction? What will be the post-merger issues? And more.

"With over 40 per cent growth so far in air traffic this year, can anyone say that consolidation of market share is not a good move?" asks Mr Amrit Pandurangi, Executive Director, PricewaterhouseCoopers, speaking to Business Line. "Jet has done the right thing by taking over Sahara. However, this does not mean that all will be fine." Excerpts from a brief interview:

What significant post-merger issues emerge now?

The challenge is just beginning and is not an easy one to handle. Jet has to ensure that post-merger issues, particularly relating to people and systems, are given the utmost importance, even as it does not take its eyes off the fiercely competitive market.

Integrating the routes without losing the advantages either of them had, a clear positioning of the combined airline in the eyes of its loyal customers and holding on to its people in this extremely people-fragile market should be some of the critical elements of its strategy.

Not just strategising about all these but actually executing them in a war-like manner in the shortest possible time is critical. And then there are the financial issues.

On the valuation.

The jury is still out on the price that has been paid for the acquisition. Now that it has been done, they need to look ahead at most innovative ways of making the financials work.

Cost-cutting is not easy. Revenue enhancement is even more difficult in a situation where every airline is wooing all types of customers. But Jet has shown in the past that it can do well.

Hopefully, that should give them the experience and the strength to come out with newer ways of doing well.

What does the deal mean to the industry?

The Sahara takeover is a clear indication that this industry will see more consolidation. Traffic is growing rapidly and will continue to grow for some more time, perhaps at a slightly reduced pace.

But that does not mean that the number of airline companies can continue to grow the way they have in the recent past.

Unless there is a dramatic reduction in any of the costs (which is very unlikely, including in fuel and taxes), there is every reason to believe that there will be fewer players in the future.

Consolidation may not happen very soon but it will certainly happen in the medium term.

So, all those who are not adding value in their businesses, must watch out. And hopefully, that would be good for the travelling public, who won't have to worry about cancelled flights.

More Stories on : Interview | Mergers & Acquisitions | Airlines | Jet Airways (India) Ltd

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