Email
Print
ShareMumbai/Bangalore: Budget airline SpiceJet Ltd is seriously evaluating buying out its rival JetLite. It is currently doing due diligence for any possible acquisition of the low-cost subsidiary of the Jet Airways.
A person close to the development confirmed this to DNA Money, saying, "due diligence is happening but only to check if the airline was worth acquiring or not."
SpiceJet, which had got funding of around $80 million from American investor Wilbur Ross a year back, has been scouting for the right buy for some time as it seeks to consolidate its position in the industry.
"We (SpiceJet) are looking at what synergy exists between the two airlines and whether there is operational compatibility," said a SpiceJet executive, who has been asked to appraise the ground handling facility of JetLite.
Sanjay Aggarwal, CEO, SpiceJet, refused to comment. "We do not confirm or deny such speculation," he said. According to industry sources, JetLite was the best fit for SpiceJet as both airlines have the same fleet -- Boeing 737-800 -- and were operating in the same segment. It would also push up the New Delhi-based airline's market share of 12.8% by 7.3% -- JetLite's share in June as reported by DGCA.
JetLite's fleet consists of 24 aircraft with 17 Boeing 737-800s and seven Canadian Regional Jet-200s (CRJ-200s) while SpiceJet has Boeing 737-800s and 737-900s.
However, JetLite's planes are old, which, an industry expert said, could push up the maintenance of SpiceJet. "JetLite is an old airline with old aircraft whereas SpiceJet has a young fleet. So, any airline acquiring JetLite will see its maintenance cost go up substantially," he said.
Another stumbling block in JetLite's acquisition is Jet's legal tussle with its former owner Sahara India Commercial Corp Ltd over payment of dues. The two parties have approached the Bombay High Court to settle dispute over tax liability of Rs 37 crore.
A person in the know said Sahara has claimed a penalty of Rs 550 crore for Jet's default in paying its instalments on time. The Naresh Goyal-owned airline, which acquired JetLite in 2007, was supposed to pay a renegotiated price of Rs 1,450 crore in four instalments between 2008 and 2011. Now, with Jet missing the 2009 instalment, which was due in March, Sahara is demanding it pay the original price of Rs 2,000 crore.
But a person close to the Jet-Sahara dispute said the legal tangle would not impact the sale as long as Sahara gets its money. However, industry sources said the dispute may jack up the price of JetLite as any penalty payout by Jet would also be included in it.
"This is a very good market to buy as valuations are very low but Jet's legal tangle with Sahara will make JetLite expensive. Cost will be very important factor," he said.
