Also read: Jet Airways in stake sale talks with Etihad: Source
Below is the edited transcript of the interview.
Q: Do you think Jet Airways will be able to strike a deal and sell around 24 percent odd stake or is it unlikely to materialize?
Bhargava: The deal should materialise because Jet Airways is cash starved and they need funds for expansion. The international operations are not performing as per expectations so they have withdrawn flights from Milan, Johannesburg etc. Debt can only be reduced if they get someone to buy stake. Etihad or any of the gulf carriers have made it very clear that they see Indian market as a growth market, not because Indian market is growing but from their perspective because they can take a whole lot of Indian passengers from various Indian cities through Jet Airways' network, funnel it to their hub and then take it to Europe and United States.
It is a very good proposition for a gulf carrier, because they know that fares are low in Indian market, they may not be able to make money. Any western carrier or any listed company in Europe would be accountable to the shareholders to answer why they are entering into a business where there will be losses for next few years. However, this is not the case with gulf carriers.
Q: Which way do you think it will work for some of these potential buyers? Will they accept or agree less than 49 percent? In the past Jet has been quite reticent for giving up that much control. Will it only work if that much control goes across or are these buyers now willing to pick up whatever chunk they can from some of these Indian aviation players?
Bhargava: Indian players can be divided into two categories. Certain airlines which are doing exceedingly well have professional management. I do not think a foreign carrier will insist on getting 49 percent equity. They may settle for even less, because they maybe driven by the commercial interest. India's market they can get on since they may not be allowed to operate to 10-12 Indian cities, so they can bring all the originating traffic of these cities to a hub, Jet Airways carrying it to their hub and then onwards to Europe and United States because India is served by the European and American carriers but gulf carriers have been beating them as far as the fares are concerned and they are a very lucrative proposition for the Indian passengers.
It will be a gainful situation for Jet as we have seen in the recent past. Jet has already ceded the domestic market to Indigo as number one player and to Air India also in the last two months. Jet Airways needs money to expand and it can come from stake sale. If it comes, it will be good for both Jet Airways and gulf carriers because they will be able to cater to the Indian market far more beneficially and increase the load factors and profitability even if they lose in the Indian market in a way.
Q: What will be the financial implications of this deal? The deal is potentially valued around USD 450 million. How would you say that fits with Jet's current valuations and what does it mean for a minority shareholder?
Lillaney: The valuations are quite reasonable as Etihad Airways is continuously buying minority stakes in international airlines across over the world. They recently bought around 10 percent stake in Virgin Australia at around 0.25 times market cap to sales and given that these airlines are growing at 7-8 percent and Indian airlines are growing at around 25-50 percent, so this valuations are quite justified.
Q: What about SpiceJet and Air Asia? Although it has been denied by Air Asia do you think any deal with SpiceJet is likely?
Bhargava: There is no denial that SpiceJet is a good candidate. It has been increasing its market share, but Air Asia may not be interested considering that Air Asia has withdrawn its own flights from Mumbai and Delhi because they felt that Indian market are too cost prohibitive. Unless there are structural changes made in the Indian market by reducing the cost of operations, airport landing, navigation charges, fuel charges etc. I do not think Air Asia will see a very, very bright prospect for SpiceJet though SpiceJet is doing exceedingly well.
Q: What is your view on SpiceJet?
Lillaney: Air Asia has a no acquisition policy. If they change their policy they can definitely look into India. Other low-cost airlines from Europe or even the Middle East are very much interested in acquiring stake in SpiceJet. At current valuation it is quite reasonably priced and it can definitely command a premium.
Q: What are you hearing about the potential price that could be discovered for SpiceJet though, because it is a wide range that reports seem to indicate in terms of a potential deal?
Lillaney: The first deal which happens will become the base of valuation and given the current news, I think 0.5 times market cap to sales will become the base of valuation as per the news. SpiceJet can easily command a 40-50 percent premium valuation from the current market price.
Q: Where does this leave a stressed asset like Kingfisher Airlines? Is there enough interest in the Indian market for people to pick up an aviation company where business is practically down to nothing or do you think this will become the bigger and the better performer, shine out more, so something like a SpiceJet and Jet gets interest, but not likely for a Kingfisher ?
A: I have maintained for quite sometime that Kingfisher cannot come back into flying, because it has too much of debt. It has zero percent market share and why would a foreign carrier evince interest in Kingfisher, whose license is revoked, commitments being made by Kingfisher to Directorate General of Civil Aviation (DGCA), to its own employees not being honoured, leasing companies having had to take back the aircraft.
Kingfisher in a way has muddied its image worldwide. With international muddle image, I do not think anyone will evince interest unless Vijay Mallya decides that irrespective of how much of money he loses he would sill like to get back. But the bigger question is where is the money and where is he going to get the money from?
Anda sedang membaca artikel tentang
Eithad-Jet deal to be beneficial for both parties: Bhargava
Dengan url
https://kesehatanda.blogspot.com/2012/11/eithad-jet-deal-to-be-beneficial-for.html
Anda boleh menyebar luaskannya atau mengcopy paste-nya
Eithad-Jet deal to be beneficial for both parties: Bhargava
namun jangan lupa untuk meletakkan link
Eithad-Jet deal to be beneficial for both parties: Bhargava
sebagai sumbernya
0 komentar:
Posting Komentar