Beer baron and Kingfisher Airlines chief Vijay Mallya must be having the last laugh. Eight months ago, after backing out of a plan to buy loss-making Air Sahara, he had predicted: ‘‘The returns from Air Sahara do not justify the high price set by Ernst & Young (the valuer). I wish them (Jet) luck.’’

Six months later, with the $500 million Jet Airways-Air Sahara deal in tatters, the landscape has dramatically changed for both airlines—and the entire industry. Not only will the two full-service carriers have to deal with a legal slugfest, the aviation industry, still finding its feet, will have to rework many rules, from valuations to funding.

Steep Climb Ahead For Sahara

For now, the spotlight is on Air Sahara, which has a tough task at hand. ‘‘It’s going to be a big challenge for Air Sahara to revive its operations and find funds to run the business. With its management structure nearly dismantled, the airline could find it difficult to survive in the competitive market,’’ says Nikhil Garg, Edelweiss Capital’s aviation analyst. Apart from the big bucks required to re-start the business (anything between $100 million and $400 million, depending on who you speak to), the airline has to restaff operations. The carrier also needs to retain its skilled staff like pilots and engineers who has left citing lack of information.

The bottomline: Sahara’s market share has already dipped from 12% to 8% and load factors fallen from 78% to 58%. ‘‘What we will now see is a fight by Air Sahara on retaining its original flight schedules. After the deal, the flight timings of both the airlines were rationalised to avoid competition,’’ an industry watcher said. The airline will now also have to work towards getting all of its aircraft to fly again as 10 of its 27 aircraft are grounded.

... contd.