Hyderabad : Airline barons Vijay Mallya and Naresh Goyal today quashed rumours of a merger between Jet Airways and Kingfisher Airlines.
"There is no equity swap. Our understanding is for purely commercial alliance," Mallya said on the sidelines of an aviation show here.
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."
Both airlines are reportedly hit by losses of up to Rs.10 crore a day, besides facing pressure from oil companies to clear their dues.
Though no official confirmation was forthcoming yet, on what the operational strategies entail, media reports suggested the alliance could be on code share, ground handling, sales, frequent flier programmes and rationalisation of domestic and international routes.
The two private airlines were hoping that the synergies would help increase airfares by about 15 per cent, in the face of difficult market conditions.
Industry sources indicate that attempts had been made to get Air India also on board such an alliance.
Meanwhile, Captain Gopinath, the vice chairman of Kingfisher Airlines, is reportedly planning to buy back Air Deccan as he is unhappy over the alliance between Kingfisher and Jet Airways.
Sources indicated that Captain Gopinath may formally put up the proposal before Kingfisher Airlines Board meeting scheduled for Wednesday.
Gopinath is expected to get the backing of some overseas investors for the buy back proposal.
Mallya now holds 65 percent share in Kingfisher. So, Gopinath's proposal will take wing only if Mallya too agrees for the sellout.
The Economic Times has quoted Mallya as stating that he is not in favour of the sellout proposal.
Justifying the deal with Jet Airways, Mallya has stated that the arrangement will be beneficial for shareholders of both the airlines as it would result in a synergistic benefit of about Rs.1500 crore a year.
Moreover, the tie-up between the two airlines would help rationalise costs and improve profits, which could be passed on to consumers, Mallya says. opinath is reportedly upset that Mallya has abandoned the low-cost model after the merger with Kingfisher, resulting in lower passenger volume.
Kingfisher Red management, however, maintains that it carried 3.29 lakh passengers in September as against 2.43 lakh of JetLite and 2.13 lakh of SpiceJet.