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No plans to merge, say Mallya, Goyal

Last updated on: October 15, 2008 11:37 IST

Amid speculation that there could be a merger between Jet Airways and Kingfisher Airlines, promoters Vijay Mallya and Naresh Goyal said that there are no plans for equity sharing and there are no discussions on this issue.

"There is no equity swap. Our understanding is for purely commercial alliance," Mallya said.

Justifying the coming together of the two airlines, which account for about 60 per cent of the market share, Goyal said that the break-even point for the aviation sector is at 90 per cent capacity utilisation whereas, "We are now operating between 60-70 per cent."

Goyal said, "On top of all this, international airlines are dumping capacity in India, lowering their prices knowing we cannot match the competition.... therefore, we have to work together."

Asked about Jet retrenching up to 1,000 employees following the alliance Goyal said, "They were probationers. Our idea is not to get rid of (permanent) staff. Without them no one can exist."

Stating that demand is more compelling now than ever before, Mallya said, "We are re-evaluating our entire international route structure. No point in flying London (by Kingfisher) half-an-hour after Jet. Therefore, we are doing code sharing and rationalising international route."

On cost savings as a result of the alliance, Mallya said, "Cost saving can be Rs 1,500 crore (Rs 15 billion) for both. But this is my personal estimate. People are working on it."

"The results of benefits of the alliance you can see in the next quarter," he added.

Both Jet and Kingfisher are believed to be losing about Rs 10 crore (Rs 100 million) a day, accentuating a financial crunch that has prompted each of them to downsize the manpower, rationalise and cut routes.

Kingfisher has also cut the fleet size to overcome the situation. Echoing the sentiment Goyal said, 'because of the rising cost situation, bankruptcy was facing us.

In the US there is a Chapter 11, but there is no such thing in India... market size is no answer to profitability. Costs are going up and up in India. There is excess capacity of about 30 per cent. No company can last if cost is not lowered."

Emphasising that alliance would help them rationalise routes to improve viabilities, Goyal said that the major routes like Delhi, Mumbai, Bangalore, Hyderabad needed to be rationalised between the two companies.

"Therefore the companies can combine their strength to handle stores, spares, engines and inventories instead of operating these separately.

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