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Last Updated: Thursday, 19 January 2006, 10:50 GMT
Indian airlines in $500m merger
Jet Airways plane
Jet Airways commands 35% of the market in India
Indian airline Jet Airways is to buy rival carrier Air Sahara in a deal worth $500m (284m).

The takeover - the biggest in India's aviation history - will create the country's largest airline.

Jet Airways, which was founded by London-based former travel agent Naresh Goyal, controls about 35% of the Indian domestic airline market.

Analysts say the deal will help the company consolidate its position in India's flourishing aviation market.

Air Sahara, owned by the reclusive businessman Subrata Roy, controls about 12% of India's market, analysts say.

International routes

The BBC's Monica Chadha in Mumbai (Bombay) says the takeover, subject to approvals from the government, would allow Jet Airways to use Air Sahara's fleet, air routes and traffic.

Naresh Goyal, Jet Airways chairman
The deal is very good for business, our shareholders, [and] the industry.. it will prove that in India things can be done better than anywhere in the world
Naresh Goyal, Jet Airways chairman

"What we are really getting is parking slots, airport facilities, infrastructure and the fleet. We will also absorb the pilots [since] we have a shortage of pilots, and cabin crew based on merit," Mr Goyal told reporters.

The deal could also mean more international routes for the airline, as Jet Airways and Air Sahara were the only two private Indian carriers who were permitted to fly overseas.

Jet has 42 aircraft and runs 271 scheduled flights daily within India. It recently won government permission to fly to London, Singapore and Kuala Lumpur.

Low cost competition

Air Sahara has 27 aircraft and operates 134 flights daily in India. It recently begun flying to the US, London and Singapore.

Mr Goyal said there were no plans to convert Air Sahara into a low cost carrier.

Aviation analyst Alok Dalal told the BBC that the takeover would not affect passenger fares much in an industry which has seen explosive growth due to the entrance of low cost carriers.

"Both Jet and Air Sahara are full-cost airlines and do not offer low fares as compared to low cost carriers. So I think the low cost carriers will continue to give competition to these airlines," he said.

Four budget airlines - Kingfisher, Go Air, Spice Jet and Air Deccan - entered the market last industry and at least four more are expected to begin operations this year.

Air Deccan
Budget carriers like Air Deccan have made flying affordable to many Indians

India recorded a 25% growth in air passenger traffic in the past year alone on the back of a booming economy and lower fares.

Indian airlines emerged as big buyers at last year's Paris Air Show, placing orders worth roughly $12bn.

State-owned Indian Airlines and Air India will be buying 111 new airplanes between the two of them, including 50 wide-bodied long-range planes, and 43 Airbus aircraft to replace an existing fleet.

But India's aviation industry is hampered by overcrowded airports, stretched air traffic controls, antiquated ground handling equipment and a shortage of pilots and engineers.

India began to open up its domestic airline market - previously dominated by state-run carrier Indian Airlines - in the 1990s.

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