The muck flies

NEW DELHI: The reasons for the biggest deal in Indian aviation falling apart continue to get murkier. According to Air Sahara, Jet Airways cited “financial crunch” for paring the value of the Rs 2,300-crore deal by Rs 400-500 crore.

Jet also insisted that the re-constituted Air Sahara board had to include Naresh Goyal, along with the four other Jet directors. However, there was no such clause in the original sale purchase agreement.

Air Sahara then gave the option to Jet to have the new board in place with the four members -- who already had security clearances -- and let Goyal join the board as and when he gets the security clearance.

“We were ready to give Jet another grace period of 15 days for completion of the deal,” Alok Sharma, president, Air Sahara, told ET. By second week of the month, Sahara executives got firm indications from Jet that Goyal did not want to go through the deal.

Jet Airways executives continued to keep mum on the issue, and did not respond to repeated calls by ET. It may be noted that over the last three months Jet had to postpone its proposed $800-m FCCB issue.

Jet’s share price also suffered nearly 50% dip ever since it announced the deal with Sahara, leading to massive erosion in its valuation. Investment bankers note that Jet could have called off the deal in March but decided to go through hoping to raise financial resources in the market. The stock market meltdown and the volatility in the capital market acted as the final nail in the coffin, said bankers.

Air Sahara on Friday blamed Jet for intentionally bringing down the market share of the airline. “The Air Sahara brand was allowed to fall by the actions of the previous management. This led to loss of faith in the brand among passengers and travel agents,” Sharma said. The Sahara management conceded that on-time performance of the airline had suffered over the past few months.

He said the priority of the Air Sahara management is now to shore up employee morale, regain consumer confidence in the airline and revive the brand. The airline currently is operating some 100 flights per day which would be increased to 120 next month and by August plans are to have 135 flights per day, with induction of two new aircraft on lease.

The airline is currently flying with 70% load factor, as against 80% plus in the deal period of December ’05.Sharma reconfirmed Air Sahara plans of inducting 14 aircraft into the fleet over the next one year. It currently has a fleet of 27 aircraft.