Jet Airways' Attempted Acquisition of Air Sahara

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Case Details:

Case Code : BSTR219
Case Length : 17 Pages
Pages Period : 2005-2006
Organization : Jet Airways (India) Ltd and Sahara Airlines Ltd
Pub Date : 2006
Teaching Note :Not Available
Countries : India
Industry : Aviation

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Monopoly Concerns

After JA's announcement of its decision to acquire AS, a member of the Rajya Sabha (the Upper House of the Indian Parliament) complained that JA would create a monopoly in the domestic airline industry by controlling almost half the market.

This would not be in the best interests of consumers and investors, the member said. The deal between JA and AS also faced opposition from airlines like Kingfisher Airlines and GoAir.

In fact, four airlines, Kingfisher Airlines, GoAir, Air Deccan, and IndiGo formed an alliance called Indian Airline Operators' Association (IAOA) before the formal announcement of the JA and AS deal was made.

The purpose of the alliance was to appeal to the government for equitable allotment of parking slots and prime-time departure slots. Later, however, Air Deccan backed out of the alliance.

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Capt. Gopinath, CEO of Air Deccan, said, "I am not part of (Mallya's) alliance. I don't want to be a part of an airline group to take on Jet. What I am not looking at is an association which includes only a segment of the industry, as that would not represent the larger interest of the industry..."


Analysts opined that though JA had acquired a dominant position in the Indian airline industry, it would need to work hard to sustain this position in the long run. This was because several new private carriers were expected to enter the industry in the next few years.

Observed Alok Sharma, vice president, AS, "Traffic is booming, but as we see it, capacity growth will overtake traffic growth in the next few years. Last year, traffic grew by 20 percent to 25 percent, but load factors of full service carriers were still 70 percent or so."Also, IA and AI were taking steps to improve their operations. IA, which had been making losses since 2000-01, had become profitable in 2004. The airline also undertook a major re-branding exercise in December 2005 with a view to enhancing its image. IA and AI were also expected to go in for Initial Public Offerings by mid-2006. Reportedly, the GoI intended to sell around 20-25 percent of the stakes in these companies...


Exhibit I: Airline Companies Operating In India In 2006
Exhibit II: Airlines To Be Launched In India
Exhibit III: Market Shares Of Major Airline Companies In India In The Domestic Sector In January 2006
Exhibit IV: Financial Results Of Jet Airways For The Year Ended March 31, 2005
Exhibit V: Aircraft Operated By As And Ja As Of February 2006

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