JetLite may merge with Jet Airways this year

MUMBAI: Jet Airways (India), the country’s largest private airline is likely to merge its wholly-owned subsidiary JetLite into Jet Airways in the current fiscal. Jet promoter Naresh Goyal is considering the merger to break even by the end of the current calendar year.

Jet Airways had acquired Air Sahara in 2007 and had rechristened it as JetLite, as a low-cost carrier. Jet Airways chief commercial officer Sudheer Raghavan told ET, “We are not ruling out the merger but haven’t finalised anything.”

“The company is analysing many options to break even by December end at any cost as aviation is our core business and we are in the industry to do business,” he added. It was learnt that Jet Airways wants to raise funds but bankers and financial institutions will put in money only if the business will be profitable and merged into a single entity. “It’s difficult to get funding from institutions as no one wants to invest in the airlines industry at present,” said Mr Raghavan.

Jet Airways, which has more than 25 per cent share of the Indian market, thinks it is difficult for low-cost carriers to remain in business with such low fares in current turbulent times.

“There are people who think crazy low fares will increase the load factor and subsequently sustain the airline. The fares should be fixed in the range where it makes the business profitable,” said a Jet executive. An analyst with a brokerage firm said JetLite has a weak balance sheet and merging JetLite into Jet Airways would be a wise decision in the current scenario as carriers are looking for mechanisms to stay afloat. Moreover, as a full-fledged carrier and business class target, JetLite didn’t fit into Jet Airways long play strategy.

The breakeven is possible but not before FY09 as Jet Airways posted losses in excess of Rs 700 crore during the first quarter of the current financial year, the analyst added.

JetLite, which has around 12 per cent market share, has already cancelled 15 flights and is likely to scrap around 10 more in the coming months. It may bring down its total flights to around 125 from 150. Domestic jet fuel prices, which constitute up to 45 per cent of an airline’s operating costs, have risen by 56 per cent since the start of the year on the back of high crude oil.

The Indian aviation industry had losses to the tune of Rs 8,000 crore in 2007-08. The number is expected to double this fiscal. Aviation Turbine Fuel (ATF) is mainly responsible for this situation.

Source: http://economictimes.indiatimes.com