Jet Airways Ltd wants to keep alive subsidiary JetLite’s licence even if the latter’s operations are merged with Jet—a move that analysts interpret as promoter Naresh Goyal retaining an option to start another airline if it comes to that.
The civil aviation ministry is baffled by the request, according to two people aware of the situation.
When two airlines merge the assets are transferred to one licence and the other licence lapses.
Jet’s plan is to make JetLite a division in itself, but it wants the JetLite licence to remain.
JetLite, formerly Air Sahara, was bought by Naresh Goyal in 2006.
Both Jet and Sahara were born when government allowed private airlines in the 1990s. Jet was issued its licence in February 1995. Sahara was its issued a year later in January 1996.
The acquisition closed in 2007 for ₹ 1,465 crore.
Almost a decade later the airline’s promoter Naresh Goyal said in September last year that the airline would merge with Jet to “create a seamless organisation, delivering exceptional service to its guests."
Only, it turns out, he wants to retain the licence.
Jet has a fleet of 98 aircraft. JetLite has eight Boeing 737 planes, according to the aviation regulator DGCA.
“We are not sure what to do with it," said a government official referring to the request from Jet. “There are historic precedents in mergers which are being pulled out. We will take a decision after this review," added this person who asked not to be identified.
Jet confirmed the move but did not say what it would do with an extra licence, albeit one kept in abeyance. The Air Operator’s Permit Package or AOP would “provide Jet Airways flexibility in network planning and operations, and enable us to address emerging trends in the aviation industry," a Jet spokesperson said in an e-mail.
An analyst said this could be to potentially start a new airline in the future depending on the growth and market conditions.
Jet Airways has sold part of its stake to Abu Dhabi Etihad Airways and has been aligning itself with Etihad on route network.
“Keeping JetLite licence gives Naresh Goyal a strategic option to start a low-cost carrier or a hybrid low-cost carrier subject to market conditions in the near future, even independent of Etihad," said South Asia CEO for aviation consultant CAPA Kapil Kaul.
Jet’s current management is overseen by Etihad, but a new airline could be free of any controls from Abu Dhabi, Kaul explained.
“Retaining the Jetlite licence is a smart move and opens up possibilities as the current arrangement with Eithad places restrictions on Goyal."
Former Director General of Civil Aviation Kanu Gohain said Jet’s request was untenable and pointed out that when Kingfisher Airlines and Air Deccan merged, one of the licences became void.
“This cannot be allowed. How can it be allowed? One airline, one licence."
Much like the Deccan acquisition that cost Kingfisher Airlines dearly, the Sahara acquisition hurt Jet.
Acquiring Jetlite was Goyal’s biggest strategic mistake as it yielded nothing except wasting precious capital, said CAPA’s Kaul. “Without this acquisition, Jet would have been financially and strategically much stronger and wouldn’t have required Etihad."