'Aviation business is no more profitable'
Consistent increases in aviation fuel costs and mushrooming of budget airlines have made the aviation business non-profitable, reports Indulal PM.india Updated: Apr 12, 2007 22:25 IST
Naresh Goyal has got Air Sahara 40 per cent cheaper than the original price of Rs 2,300 crore. But neither Jet Airways, nor Air Sahara stands to benefit from the deal.
Aviation sector analysts are of the opinion that the valuations in the aviation industry have gone for a toss since the airlines signed the original agreement last year. Consistent increases in aviation fuel costs and mushrooming of budget airlines have made the aviation business non-profitable.
Investment banking sources said that the deal was not cheap. "Though the valuation they are talking about is Rs 1,450 crore, the actual valuation will be well above Rs 1,900 crore, considering the Rs 275 crore creditors' deduction and other interests and arrears."
"Jet Airways has only bought out a competition, and nothing more," said Arun Kejriwal of Kris Research. "The infrastructure for which Jet Airways has paid the price is not very valuable since parking bays come with the aircraft," he added.
According to the revised commercial agreement, which was approved by a three-member arbitration panel, Jet Airways had already paid Rs 500 crore, while Rs 400 crore will be paid to Air Sahara before April 20 and the remaining Rs 550 crore in four interest-free annual equal installments beginning on or before March 30, 2008.
Announcing the deal, Jet Airways Chairman Naresh Goyal said it was a good deal considering the current civil aviation scenario. "It is a good deal for the airline as well as for its shareholders," he said.