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Govt formulates airlines' merger law

The guidelines were framed anticipating corporate manoeuvres in the aviation industry that will govern acquisitions.

india Updated: May 12, 2006 23:33 IST

The Indian government has formulated a policy governing the use of airport infrastructure in case of mergers or take over of one airline by another or in case sale or transfer of aircraft from one company to another.

Civil Aviation Minister Praful Patel on Friday informed parliament that the government has given its consent on the guidelines framed by the Aircraft Acquisition Committee (AAC) in March.

The guidelines were framed anticipating likely corporate manoeuvres in the booming aviation industry that will govern future mergers and acquisitions. This will also help ease Jet Airways' troubled plan to merge rival Air Sahara with it.

The AAC had in its meeting held on March 28 this year considered the policy on transfer of airport infrastructure in case of merger or takeover of airlines.

It was decided that only the user rights over such infrastructure that are given to an airline on non-payment basis like the parking bays, landing slots and other facilities may be allowed to be used by the airlines that takes over the aircraft.

For all other rights, the terms of lease and sale agreement between airport operator and airline will apply.

While the guidelines allow 100 per cent transfer of all assets of one airline to another in the case of a merger or acquisition including aircraft, flight routes and schedules and even parking bays, they do not grant "grandfather rights" to an airline acquiring the entire assets of another.

This means that all assets will be transferred to the new company, but it will not be able to lease out or sell the acquired property.

According to sources, the guidelines are expected to facilitate the $500 million acquisition of Air Sahara by Jet Airways.

The Jet-Sahara deal, the biggest ever in Indian aviation, got delayed as the government did not have a policy on mergers.

The two firms have extended a deadline for implementing the deal, as the government, which claims it had no formal knowledge about the move, had not formulated rules for approving the merger.

First Published: May 12, 2006 22:45 IST