Jet Airways keeps options open to raise funds

Jet Airways, which is buying rival Sahara Airlines, may raise more money as it seeks to retain market share in the South Asian country's increasingly crowded aviation space.

"A company like ours always needs money for expansion,'' Jet Airways Executive Director Saroj Datta told reporters at an aviation conference in Mumbai today. "We have kept our options open on raising more money.''

After the $355 million Sahara acquisition in April, Jet Airways said it plans to sell as much as $400 million of stock in the next few months to fund the purchase and buy new planes. Jet Airways raised Rs 1,900 crore ($465 million) in February 2005 in India's biggest initial public offering by an airline.

Consolidation in India's airline business is driving costs down and intensifying the battle for a share of the market that grew 47 per cent to about 29 million travelers until November, according to the civil aviation ministry.

Billionaire Vijay Mallya's brewing and aviation group agreed on May 31 to buy a 26 per cent stake in the low-fare carrier Deccan Aviation, fuelling a record year for mergers and acquisitions in the industry.

The two state-owned carriers, Air India and Indian Airlines , are also being merged by the government to create a bigger airline and compete with local and overseas rivals.

After the merger, likely to be completed by July-end, the new airline would also offer budget travel, V Thulasidas, chairman- designate of the combined entity, said in Mumbai.

The phase of consolidation won't hurt the growth of the aviation industry in India, Civil Aviation Minister Praful Patel said in Mumbai. New airline licenses in the country would be based on the viability of business plans, he said.

Mounting losses of the nation's airlines and the merger of the state-owned carriers may spur further consolidation this year, according to the Centre for Asia Pacific Aviation.

Fares as low as 99 paise and high oil prices have contributed to the combined $500 million loss for Indian carriers in the fiscal year ended March, the industry group had earlier said.

"India can sustain growth of about 25 per cent for the next 10 years,'' Patel said. "So, consolidation is the way forward. We are not looking negatively at it. It will not lead to cartelization.''

Seven airlines, including four low-fare carriers, have started flights in the past four years and five more have sought approval to tap the rising demand for travel in the world's second fastest-growing economy. Indian carriers have ordered more than 450 planes for $30 billion in the past four years to tap the 50 per cent growth in air travel.