I do not know if Goyel had anticipated it or he adapted himself to get the best of the market condition, but it was a master stroke.
1) Sahara technically does not own anything. All its valuation was on the basis of the parking slots, foreign travel rights, trained pilots and crew. Either Jet could go the expensive way to buying them out, or could engineer the collapse of Sahara, and pick and choose whatever it wants.
2) Jet’s argument that only reason it withdrew was because of the time it took to get all the approvals. Well in a highly regulated industry like Indian Aviation, you cannot exist unless you know lots of government officials and ministers. It is a little hard to believe that both the CMD of Jet and the Sahara Pariwar did not have sufficient number of friends to get the required approval. Remember Sahara pariwar is always questioned for the mysterious source of finance, and its close ties with lots of political big weights.
3) Remember that Sahara, was a full service airline and most of the spoils of it will go to other full service airlines, namely Jet, Kingfisher and Indian Airlines. Indian Airlines does not have the much needed approval to expand, and they are not aggressive enough to make the best of the present situation. Kingfisher operates in too little routes to benefit much. So Jet alone stands to gain the most from the current situation.
4) Even this 100cr is supposed to be returned. So Jet had 2 options, either pay a few thousand crore and gobble the entire airline or pay 100cr and get the most Value for money from it.
5) If the Sahara goes under, or discontinues a lot of its flights, then the landing rights, parking and hanger bays will go for auction. Now I was looking at the finances of most of the airline companies. Almost all of them are bleeding because of the accumulated losses. Almost all of them have booked billion dollar worth of aircrafts. So there will not be too much free capital with them to have a bidding war where the winner has paid dearly and actually lost.
6) I quote from the Air Deccan release which they gave when they went public. “.. Indian aviation industry is headed for a consolidation…” So if you thought that Jet missed an opportunity, then rethink. There will be lots of airlines going bankrupt when the boom flattens out. Only difference will be that Jet (the only airline in India which is making profits) will be in a much better position to buy them out.
Update: Jet Airways posted losses this quater, and its financial condition is not very well. And its stocks are trading at a 515.65 which is near its 52 week low. I wonder how big restructuring budget Jet would have required if it was made to absorb the losses of Sahara also.
