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Will Jet-Sahara flight hit DGCA?

On January 11 last year, Jet Airways was allowed to fly internationally.

india Updated: Jan 20, 2006 02:18 IST

On January 11 last year, Jet Airways was allowed to fly internationally. This January, it has managed to initiate operation consolidation with a big bang acquisition of Air Sahara which gives it a veritable sweep of Indian skies and allied infrastructure on the ground.

What is the impact of this consolidation on public sector carrier Indian (Airlines) which is trying desperately to rejig its image? A market share of 48 per cent for the consolidated entity versus an ever-dwindling share of 30 per cent for Indian. Will Indian under a new CMD V. Trivedi approach the government, asking for a level playing field? Or will market forces prevail? And what about the other carriers, low-cost and mutant Kingfisher? Kingfisher chairman Vijay Mallya wants the acquisition and its implications to be studied in detail by the authorities. Mallya said, “I am more concerned about the airports and the infrastructure. Jet may have more parking slots. The government should look into sorting out infrastructure issues.” Smaller carriers would have to enter into strategic relationship to utilise available infrastructure to optimum level, says Go Air MD Jeh Wadia.

While a window of three months exists for the merger to be completed, the Ministry of Civil Aviation and Directorate General of Civil Aviation have enough time to study the modalities. Sources told HT that a committee might be constituted under the DGCA to look into the issue of whether Jet could be permitted to take hold of domestic and international routes, parking slots and other clearances that currently lie with Air Sahara.

“If all their paperwork and documentation is as required, there should be no reason to deny them,” a senior official indicated, dismissing speculation that this might not be permitted as it would amount to permitting a monopoly to Jet Airways as the only private Indian carrier flying abroad.

“This is a first for the Indian civil aviation industry. Though several such mergers have taken place abroad, the situations cannot be compared. In India, the sector itself has opened up to private carriers in recent years. Allowing them to fly abroad is an even newer decision. So, the factors to be considered are quite different. The DGCA is apprised of the matter and will look into it for future course of action,” sources said.

Sources said that the Home Ministry’s clearance would also be sought on some issues. As and when the merger takes place, the airline’s board of directors would be re-appointed. Even if they are all the same persons as in the current board, a formal clearance for each individual would be required. Jet’s expansionist strategy includes commitment of $3 billion for acquiring over 30 aircraft from US manufacturer Boeing, including 10 B-777, as many B-777 (LRs) and 10 B-737s. Infrastructure bottlenecks, mismatch between demand and supply, high ATF prices, poor load factor and increasing competition are some of the problems that Sahara said made it decide to exit the business. Jet, which has been facing problems getting landing rights in the US where a company has accused Jet of receiving terrorist funding, may use Sahara as a proxy to fly to that country. In any case, Jet will have to re-apply to the US despite the fact that Air Sahara has a code-sharing arrangement with American Airlines.

In fact, complaints from some smaller carriers which apprehend threat to their business from the takeover deal may unleash a probe against Jet by the Monopolies and Restrictive Trade Practices Commission.

The Competition Commission of India, which is also a body to check cartels and monopolistic trade practices, on Thursday said it would have examined the deal if it had been functional. “Such mergers (Jet-Sahara) are likely to have a scrutiny by commission from the competition angle,” CCI member Vinod Dhall said.

But Sahara says it believes in consolidation in the industry, given the fact that five new airlines are waiting in the wings to start their operations this year and another 60 aircraft are likely to be added in the next one year.