Jet eyes stake in SpiceJet

Investment bankers of the carriers to meet next week.

Barely two months after the Air Sahara acquisition, Jet Airways, the country's largest private airline, is interested in SpiceJet, the Delhi-based budget carrier.

Investment bankers of both the companies are expected to meet next week to discuss the issue.

Sources close to the developments said Jet is eyeing the stake of the Kansagra family-promoted Royal Holding Services and Gulf-based investment house Istithmar PJSC, which hold around 13 per cent each in the airline.

The sources said Vijay Mallya's Kingfisher Airlines has also initiated talks with Spicejet for a possible buyout. However, this could not be confirmed.

SpiceJet Director Ajay Singh holds 4.16 per cent in the airline. When contacted, Singh said, "We are a well-funded company and are not looking at further dilution of equity. Why should I exit when tough times are getting over for SpiceJet?"

Jet Airways CEO Wolfgang Prock-Schauer said no talks are being held with SpiceJet on acquisition.

Sources said the commonality of fleet and easy integration with Air Sahara are the key reasons behind Jet looking at SpiceJet. "It is a well-focussed budget carrier which can serve the domestic market, while Jet Airways can position itself as an international carrier," they added.

Funding will not be a problem for Jet since it can opt for further equity dilution through private equity placement. Chairman Naresh Goyal holds 80 per cent in the company. Moreover, the merger, if it takes place, will give Jet more pricing power.

Jet Airways combined with JetLite (earlier known as Air Sahara) has a 29.3 per cent market share, but trails behind the Kingfisher Airlines and Air Deccan combine.

An acquisition of SpiceJet, which has a market share of 8.2 per cent, could push up Jet's share to 37.5 per cent, which would be way ahead of the Kingfisher-Air Deccan combine's 30.2 per cent.

Besides domestic coverage, a SpiceJet acquisition would result in synergy of engineering, pilots, maintenance, training and other operations.

The Jet Airways scrip zoomed 4.38 per cent on the Bombay Stock Exchange (BSE) to close at Rs 788.20 today, against the previous day's close of Rs 755.10. The SpiceJet scrip also shot up by 7.08 per cent to close at Rs 56.70 today, against yesterday's close of Rs 52.95.

Jet Airways currently operates a fleet of 63 aircraft, with one Boeing 777-300 ER, 48 Boeing 737 family aircraft, three Airbus A340-300E aircraft, three Airbus A330-200 aircraft and eight modern ATR 72-500 turboprop aircraft.

Jet operates over 340 daily flights to 50 destinations. SpiceJet operates over 83 daily flights in 14 cities, with 11 Boeing 737-800 aircraft like the ones Jet Airways uses.