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Last Updated: Thursday, 22 June 2006, 04:50 GMT 05:50 UK
Huge Indian airlines merger off
Jet Airways plane
Jet Airways commands 35% of the market in India
Indian airline Jet Airways' deal to buy rival carrier Air Sahara has fallen through after a deadline to complete it passed at Wednesday midnight.

The $500m (284m) deal would have been the biggest in India's aviation, creating the country's largest airline.

The BBC's Karishma Vaswani in Mumbai says the deal failed because Jet Airways felt the price was excessive and wanted a discount.

Air Sahara will take back control of its airline, a company official said.

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

Air Sahara, owned by the reclusive businessman Subrata Roy, controls about 9% of India's market, analysts say.

The takeover was subject to approvals from the government and would have allowed Jet Airways to use Air Sahara's fleet, air routes and traffic.

The deal was proving to be an expensive proposition for Jet Airways
Kapil Kaul, aviation analyst

"From Thursday, we are going to run our airline as if there had not been any deal. It is our firm belief that we will be able to run the airline as we have been doing over the past 13 years," Air Sahara president Alok Sharma was quoted in The Hindu newspaper telling reporters.

'Expensive'

Jet Airways had also failed to secure government permission for its chairman Naresh Goyal to join the board of directors of the rival carrier.

There has been no official comment as yet from Jet Airways on the developments.

One aviation analyst said the deal would not have made financial sense for Jet Airways.

"The deal was proving to be an expensive proposition for Jet Airways. Not only was it paying $500m to buy Sahara but it would have ended up paying more money to bring it to the same operational level as itself," Kapil Kaul, chief of the Delhi-based Centre for Aviation told the BBC.
Jet chairman Naresh Goyal
Goyal was refused government permission to join the Sahara board

"It would make more sense for Jet to invest all those resources in consolidating its position in the domestic and international markets."

Mr Kaul said Indian fliers will not be affected by the development.

"They will continue to get air tickets at unbelievable prices from other airlines. With new airlines entering the market soon and increased competition, passengers will continue to enjoy the good times," he said.

Jet has 43 aircraft and runs 320 scheduled flights daily to 48 destinations in India and abroad. It recently won government permission to fly to London, Singapore and Kuala Lumpur.

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

Explosive growth

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.





SEE ALSO
Indian airlines in $500m merger
19 Jan 06 |  South Asia
India worried over air fare wars
29 Jun 05 |  South Asia
India's Jet Air plans share sale
07 Jan 05 |  Business
India opens skies to competition
29 Dec 04 |  Business
Indian budget airline to expand
05 Oct 04 |  Business
Cheap flying option for Indians
23 Aug 04 |  South Asia
Gulf gets first no-frills flights
29 Oct 03 |  Business

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