Mallya has $100mn for Sahara

Jet says it has no such intentions.

Vijay Mallya's Kingfisher Airlines today said it was willing to pay $100 million to buy a stake in Air Sahara, which was looking for funds to finance its expansion plan.

Another private airline, Jet Airways, which was projected as one of the front-runners for acquiring a stake in Air Sahara, said it had no such intention.

Air Sahara has valued itself at $750 million to $1 billion.

A stake in Air Sahara would have helped Jet Airways establish a big lead over its nearest competitor Indian Airlines. Jet has the largest market share.

"We are in talks with Air Sahara for an investment. We see it as a strategic investment," Mallya said today. But he did not specify the equity Kingfisher would want to pick up in the country's third largest domestic airline.

For Kingfisher Airlines, according to Mallya, an equity stake in Air Sahara will help in synchronising the operations of an established carrier, with strong connections in certain key sectors.

Jet Airways, reportedly in talks with the Subroto Roy-promoted Air Sahara, is of the view that it does not see a business case in investing in the domestic carrier.

"We are not interested in buying a stake in Air Sahara. We have not been talking to them on this. We have a good business to handle," Jet Airways' Chairman Naresh Goyal said.

Initial estimates by Ernst & Young, appointed by Air Sahara to find a strategic partner, has put the carrier's enterprise value between $750 million and $1 billion. Based on this valuation, Mallya's $100 million will get him a stake anywhere between 10 and 15 per cent in Air Sahara.

The funds raised by the carrier is expected to be utilised to finance its fleet acquisition plan and to boost domestic operations, which are facing tough challenges from the newly launched low-cost carriers.

Aviation industry sources said Air Sahara had been in talks with a number of potential buyers, including certain domestic carriers and international funding institutions.

Air Sahara, which began operations in 1993, is on an expansion drive and plans to operate 140 flights a day by November. Currently, it operates with a fleet of 26 leased aircraft to 25 destination and has 123 flights a day.