Jet says Sahara talks still on

Jet Airways has informed the Bombay Stock Exchange that its talks with Sahara Airlines were in progress, and "at this point in time, the parties have not concluded any agreements."

Although Jet did not elaborate, sources close to the discussions said there could be a strategic partnership or an agreement for certain sectors. Jet could even take the management contract for the Air Sahara fleet.

However, there had not been any substantial progress in the talks for the proposed arrangement, the sources said.

Airline industry analysts, however, are busy dissecting the proposed alliance. Jet Airways cannot fly any of the international routes operated by Air Sahara currently.

"Under the Director General of Civil Aviation regulations, Jet cannot fly any overseas routes operated by Air Sahara by merely taking it over," they said.

The sources said liquor baron Vijay Mallya-promoted Kingfisher Airlines had evinced interest in acquiring 100 per cent stake in Air Sahara for securing operating rights but had to pull out of the race because of the stringent international operations rights.

Air Sahara connects 24 domestic and four international destinations with 134 daily direct flights, while Jet Airways connects 48 destinations including international destinations -- Colombo, Kathmandu, Singapore, Kuala Lumpur and London Heathrow.

Earlier, the US Department of Transportation had raised queries to the embassy in New Delhi following certain allegations levelled against Jet Airways.

The ministry of civil aviation has already submitted its recommendation in favour of Jet Airways and endorsed the operating permit.

"Why would Jet Airways pay a hefty $560 million for acquiring 26 leased aircraft when Jet has a decent market share in the domestic market?" analysts said. The only tangible asset that Jet Airways will get is parking and departure slots at peak times.

Besides, it will also acquire the 6,000-strong Air Sahara staff including cabin crew. In addition, it will get parking rights at airports and other infrastructure including warehousing, spare parts and related facilities.

However, this could not justify the hefty price that Air Sahara has been asking for, said a senior industry analyst. Moreover, it is not clear whether Jet is in a position to cough up $560 million at this point, as it is currently planning to acquire 30 brand new aircraft for $2.9 billion.