Sahara deal will bleed Jet Airways
Aviation experts believe that this Rs 1,450 crore deal is just the beginning and more bills are likely to follow, reports Ranju Sarkar.india Updated: Apr 13, 2007 05:10 IST
Jet Airways may have taken over Air Sahara, but aviation experts believe that the Rs 1,450 crore it is forking out is just the beginning. More bills will follow.
Jet chairman Naresh Goyal will have to spend about Rs 350 crore just to integrate Sahara with Jet. Keeping all existing flights operational — at a cost of Rs 9-10 crore per aircraft for three months — may cost Rs 250-270 crore.
Goyal has been allowed to use the Sahara brand name for a maximum of six months. He can thereafter either add Sahara’s fleet of 27 Boeing 737s to his Jet fleet, or use them as a separate low-cost carrier under a new brand. Both options will cost money.
"Branding is a huge expense. It could cost Jet Rs 40-50 crore in re-branding Sahara," said Mohan Kumar, former chief financial officer of Air Deccan. Re-branding at small airports costs around Rs 20 lakh; at larger ones, about Rs 1 crore. Sahara flies to 26 airports.
Jet will need to re-jig the route network and rationalise schedules. "The utilisation of planes will come down in the first couple of weeks of integrating operations as they would need to change schedules, withdraw some flights and reschedule them," said an airline CEO, who didn’t want to be identified.
But the biggest challenge may come while integrating Sahara and Jet employees. Air Sahara was known to pay its pilots and engineers more than rivals did. Jet Airways may have to renegotiate salaries.