The Telegraph
Since 1st March, 1999
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Jet rivals breathe easy
Deal to benefit low-cost carriers

Mumbai, April 12: Low-cost carriers aren’t squealing in alarm over the Jet Airways’ buyout of Air Sahara.

Fifteen months ago, when the two airlines had crafted a merger deal, there was a squawk of protest and a quick huddle to form a forum that would lobby the government against clearances for the merger.

Not this time.

Low-cost carriers have carved out a niche and large market shares and don’t fear a Jet-Sahara combination as they once did.

Air Deccan’s head honcho C.R. Gopinath reckons that in the next eight to 10 months, his low-cost airline will grab greater market share than Jet Airways. “We are just a little shy of Jet Airways right now in terms of market share. But we are confident we will go past them soon.”

It’s not the statistics or market shares alone which is giving some amount of comfort to Naresh Goyal’s competitors. The low-cost carriers are happy that the merger will force a rationalisation of the price discounts in the industry.

“Our perspective is that it will be good for the industry. The airline (Air Sahara) was selling low fares and undercutting no-frills carriers despite having high costs. As Jet Airways will now be answerable to its shareholders, this could come to an end,” said Ajay Singh, director of SpiceJet.

SpiceJet has seen its market share inching up steadily over the past few months. Singh is also of the opinion that considering the total acquisition cost of Rs 1,950 crore for Air Sahara, the market valuations for more efficient airlines like SpiceJet is less.

“We are undervalued despite having better operating performance and low costs. The acquisition should result in a re-rating of low-cost carriers,” he added.

At present, Air Deccan is the second largest private airline after Jet Airways in terms of market share.

Though the airline saw its share dip a bit in February, officials at the low-cost carrier are optimistic that over the next few months, it will zip past Jet Airways in terms of market share.

Singh feels that infrastructural facilities such as parking bays and landing rights that will come with the acquisition will not bring any significant benefit to Jet Airways.

When Jet Airways first announced its intention to buy out Air Sahara, the combined market share of both the airlines was put at over 50 per cent.

This was another factor that worried its rivals. However, in this calendar year, the combined market of these two airlines is now just over 32 per cent.

Kingfisher Airlines is not worried either. Although officials were not available for comments, sources close to the airline said that since its launch, Kingfisher’s market share had steadily risen to double digit figures on account of its premium and quality image. “The acquisition will not impact the airline at all,” the source said.

Jet’s shares today closed at Rs 628.65, up nearly 3.24 per cent from yesterday’s close of Rs 608.90 on the Bombay Stock Exchange.

Shares of Air Deccan rose almost 10 per cent to Rs 103.30 on the BSE from Wednesday's close of Rs 93.95, while SpiceJet's shares dropped 1.95 per cent to Rs 47.65 from Rs 48.60.

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