updated 1/19/2006 11:02:56 AM ET 2006-01-19T16:02:56

India’s leading private carrier Jet Airways said Thursday it is buying rival Air Sahara for $500 million in a takeover that will create the country’s largest airline.

Jet Airways (India) Ltd. and Air Sahara signed the deal — the biggest in India’s aviation history — late Wednesday, paving the way for a strategic alliance between the two carriers initially and a full fledged merger eventually, said Jet Chairman Naresh Goyal.

The merged entity will control more than 50 percent in India’s passenger airline market.

Air Sahara, a family-run company that is not publicly listed, has been losing money and is estimated to have piled up 6 to 7 billion rupees (up to $120 million) in debt.

“We are not getting into liabilities. The total deal is valued at $500 million, taking into consideration the parking slot, the infrastructure, the aircraft,” Goyal told reporters after the company filed a notice of the deal to the Bombay Stock Exchange. Jet’s board of directors approved the acquisition earlier Thursday.

Investors welcomed the news, sending Jet Airways’ shares up 2.6 percent to 1,158 rupees ($26) in early trading.

Goyal, who described the deal as a “total takeover,” said his airline was not planning to retain all of Air Sahara’s workers.

“No, we are not absorbing all staff. We will be taking pilots, technical staff and cabin crew, (but) it will be done on the basis of merit,” he said.

Those comments appeared to spark protest among Air Sahara pilots, who decided to strike work immediately opposing the deal, the CNBC-TV18 channel reported.

In 2005, Jet Airways overtook state-owned Indian airlines in flying the most passengers. With the acquisition of Sahara, it will also now have the largest fleet of aircraft.

Jet Airways flew 9 million passengers last year, up 14 percent from the previous year, while Indian airlines carried 8.7 million people in 2005, up 3.5 percent on year. Sahara flew 3.5 million.

Jet’s fleet include 52 aircraft, mostly Boeing Co. planes, while Sahara has 27. Indian Airlines has an Airbus-dominated fleet of 77 planes, including 10 flown by its subsidiary Alliance Air.

India’s aviation sector has experienced robust growth in recent years after being opened up to private carriers as part of a broader government liberalization program began in the early 1990s.

The competition has brought down fares and in the process attracting more passengers. Aviation officials expect the number of fliers to grow from around the current 20 million a year to some 50 million in 2010.

The Jet-Sahara deal appeared to be a “win-win” for both airlines.

It makes Jet the leader in the Indian aviation and provides the airline with access to more international destinations and greater infrastructure including more parking bays and hangers at domestic airports.

The deal also helps the Sahara group, a leading business conglomerate with interests in financial services, publishing and real estate, exit the airline business on good terms.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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