The Hindu Business Line : Letter from Jet, Sahara could have salvaged the deal

The collapse of the deal for Jet Airways to acquire Air Sahara could have been avoided if both the airlines had sent a letter to the Directorate-General of Civil Aviation (DGCA) agreeing to constitute the board with four persons, sources in the aviation industry told Business Line today.

"In early June, the DGCA asked that the two parties to send separate letters showing their willingness to set up the board with four people. There was no response to this communication. Even now there is no formal communication from Jet Airways on the deal although the share purchase agreement (SPA) for the deal has lapsed," officials closely connected with the deal said.

While there has been no official word from Jet since the lapse of the SPA that was to be sealed on Wednesday midnight, sources had indicated that the delay in security clearance for the Jet Airways Chairman, Mr Naresh Goyal, to sit on the Air Sahara board was one of the reasons for the deal falling through.

The Home Ministry clearance for Mr Goyal came only late on Thursday night well after the expiry of the deadline for the SPA to be signed.

Asked whether one of the condition precedent for the deal to go through was the induction of Mr Goyal on the Air Sahara board, sources replied in the negative. In mid-May, the Government cleared the name of four Jet Airways directors - Mr Saroj Datta, Mr Victoriano P. Dungca, Mr Javed Akhtar and Dr Vijay Kelkar - to sit on the Air Sahara board. At that time, however, security clearance was not given to Mr Goyal, the fifth person scheduled to be on the board.

Sources maintain that the Jet Airways claim of discovering more liabilities after coming on to Air Sahara board was not correct.

"Detailed vendor due diligence was done. A complete report on the balance sheet and the operations of the airline was available. This was also discussed at a board meeting attended by the entire board in late January. In fact the indemnification clause in the SPA provided for indemnification of liability not disclosed in vendor due diligence. The report was based on a joint certification by Ernst &Young and Chaturvedi and Shah (the auditors of Sahara and Jet Airways, respectively). After that anything more that shows up is a subject matter of indemnification, which means that Air Sahara would have to make good any other liabilities that arise. So where is the question of suddenly discovering huge liabilities," sources said.

In fact both E&Y and Chaturvedi and Shah are said to have certified that the indemnification amount was less than $10 million.

Jet Airways signed a deal to purchase Air Sahara for $500 million in January this year.