Tuesday, October 23, 2018

Consolidation is the best way forward for India’s struggling aviation sector

India’s turbulent aviation sector may be entering a long-pending phase of consolidation.

On Oct. 18, media reports suggested that cash-strapped private airline Jet Airways may soon be rescued by the Tata Group, India’s storied salt-to-software conglomerate.

“If this (the Tata-Jet deal) happens, then it will consolidate two to three large players,” said Peeyush Pandey, a partner at Deloitte.
However, the reports also suggested that the discussions have failed to make much headway as the question of Jet’s management control is a sticking point. The deal’s success will depend on whether chairman Naresh Goyal, who owns a 51% stake in the company, is willing to relinquish control 25 years after founding the company.

Jet Airways has denied the reports as “highly speculative” to the Times of India. Mails sent to the two companies from Quartz failed to elicit responses.

Jet’s rumoured talks with the Tatas are taking place at a crucial juncture.
The Tata Group’s obsession with aviation predates the country’s Independence. Now the conglomerate is looking to consolidate its position in the Indian skies.

Tata Sons, the holding company of the Tata Group, already owns 51% in domestic full-service carrier Vistara, a joint venture (JV) with Singapore Airlines, and 49% in budget airline AirAsia India, its JV with Malaysia-based AirAsia. With rivals reeling from high aviation fuel prices and a weak rupee, this might just be the moment for the group to scale up.

Jet, too, has been struggling for some time now. It has been under pressure to service its huge pile of debt, which, as of June this year, stood at Rs8,620 crore ($1.18 billion).
23/10/18 Kamalika Ghosh/Quartz

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