Aviation industry may have to wait longer for consolidation

Mumbai: India may have to wait a bit longer for a new round of airborne nuptials.
Three merger deals that would have begun the much anticipated second round of consolidation in the fragmented Indian aviation industry failed to take off in the past two months, said four people familiar with the matter.
Two of these deals involved US investor Wilbur Ross, a master of distress buyouts who controls SpiceJet Ltd. He tried to merge the airline with competitors JetLite (India) Ltd and Kingfisher Airline Ltd. The merger talks got grounded over valuation differences. A third merger deal between Paramount Airways Ltd and GoAirlines (India) Pvt. Ltd, too, did not progress because Paramount was not ready to take on the debt of GoAirlines. The latter is a private company and the latest data on its debt is not available.
The Indian aviation industry had a first round of consolidation when Jet Airways (India) Ltd bought Sahara Airlines Ltd (now JetLite) in April 2007, Kingfisher acquired Deccan Aviation Ltd (now Kingfisher Red) in June 2007, and Air India merged with Indian Airlines in August 2007.
According to a March report by consulting firm Centre for Asia Pacific Aviation (Capa), another round of consolidation is overdue as Indian carriers have been repeatedly battered by price wars, a spike in jet fuel prices and slowing demand.
The accumulated losses of Indian carriers over the last three-four years are estimated by Capa to be in excess of $4 billion (Rs18,680 crore).
Consolidation could be delayed further as passenger volumes increase and some airlines hope to emerge with better financials as the Indian economy picks up speed, said an investment banker.
14/12/09 PR Sanjai/Live Mint

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Categories: Indian Aviation- In General Dec 2009