Indian airlines Paramount Airways and GoAir have played down reports that they are engaged in acquisition talks which would make the combined entity control nearly 8 percent of the domestic aviation sector.
On Saturday, reports began making rounds that Chennai-based Paramount Airways, which is promoted by M. Thiagarajan, and Mumbai-based GoAir, the budget carrier promoted by the Wadia Group, were close to agreeing a cash-and-stock deal whereby the Wadia Group would sell GoAir to Paramount for Rs.100-150 crore and also get a stake of 7-8 percent in Paramount in return.
The rumors grew stronger as GoAir has nearly a debt of Rs.400 crore in its books and the sale would have helped the airline retire some of its debts.
In the past too, there have been reports that the Wadias were looking for a buyer for their airline. The names that had done the rounds at that time were Paramount Airways and budget carrier SpiceJet.
However, both GoAir and Paramount have denied the reports.
“In the light of recent speculative press reports, GoAir refutes any contact with Paramount Airlines and refuses to comment on market speculation,” the airline said in a statement.
According to Jeh Wadia, managing director, GoAir, the airline has received “a number of proposals for investment in the airline which is a testament to the shareholder value being created.”
However, the board of the company has decided not to proceed with any of the proposals and instead “focus on its business plan of inducting to its existing brand new fleet of eight aircraft another 12 aircraft, completing its order of 20 Airbus which the company bought in 2007 for $1.2 billion,” he said in a statement.
Paramount also categorically denied the reports with a spokesman saying that there was “no truth in it.”
While GoAir operates nearly 55 flights daily, flying to 11 destinations, Paramount operates 72 flights daily, flying to 16 destinations.
The reports came at a time when India's domestic aviation industry, which is dominated by Jet Airways and Kingfisher Airline (which together control over 60 percent market share), is currently passing through a turbulent time with most airlines already reporting huge losses.
India's domestic aviation industry, which is dominated by Jet Airways and Kingfisher Airline (which together control over 60 percent market share), is currently passing through a difficult time with most airlines already reporting huge losses.
According to Kapil Kaul, CEO of Sydney-based aviation consultant Centre for Asia Pacific Aviation's (CAPA) Indian unit, India's aviation sector could witness consolidation in the near future.
The industry, which has already announced losses over $2 billion for FY09, is unlikely to break-even before 3-5 years from now and till then, CAPA has suggested the carriers to get their act together and improve their operational performance by switching to leaner business models and cost-optimizing their business operations.
Already most domestic airlines have resorted to exiting loss-making routes, cutting down its fleet size and headcount, issuing e-tickets, charging for items such as snacks and checked luggage, and raising funds to cut their losses and stay afloat.
Source: IB Times