I had written and had forecast about the possibility of a mergers and acquisitions in my first aviation article on this blog site titled : "2005 Year End Aviation Review". At the time of that writing talks were not going on between any one for mergers and acquisitions. However, some Airlines were linking some of their services with other operators in those areas where a synergy existed, such as pooling of spares, ground handling and so on.
It is being announced now, January 19th 2006 that Jet Airways has taken over 100% of Air Sahara stock and the board of Jet Airways has approved the take over. The market share of the combined entities will be a little over 50%, making this, the Airline with the majority of the market share in India. Market share, ofcourse, does mean some positives for the Airline sector but not so good for the consumer in terms of low fares in the long run.
Latest information from a TV interview with Naresh Goyal, CMD Jet Airways is that they will not retain the Air Sahara brand. He goes on to say that their occupancy levels are around 73% on an average and therefore the remaining seats could be sold at much cheaper prices without incurring any additional cost. This indeed will be a blow to any so called LCC since the passenger on Jet, even while securing a low fare, will still end up getting full service and would not need to buy bottles of water and snacks on board.
Watch this space for more information on what’s going to happen after all the dust settles. I don't want to sound like a doomsday prophet but the next couple of months will see some of the so called Low Cost/budget Airlines tottering on the brink of closure forcing perhaps more mergers and acquisition. The ability of most the current crop of players (except Jet Airways in my opinion) to raise additional and crucial money for their acquisition of Aircraft and equipment, is very suspect. I am sure that some of the IPO's of these carriers will not fetch them the value that these companies are looking for. That will force some Airlines to cut their expansion plans, consolidate and in the worst case scenario, even shut down.