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Will The Deal Between Tatas and Jet Airways Fructify?

Jet Airways

Deal Between Tatas and Jet Airways

Mumbai-based Jet Airways is the largest airline on international routes to/from India with a large network and slots at key airports. Despite being a 25-year old veteran airline, today Jet Airways is facing a cash crunch, resulting in salary delays, grounding of planes, and performance degradation. It has been desperately looking looking to raise funds through stake sale in its loyalty programme and fresh issue of shares in the company. Discussions are being held with private equity firms Blackstone and TPG and also with Etihad Airways, which owns 24 per cent stake in the airline. Deal Between Tatas and Jet Airways

So far Jet has not found any takers. Read More: Jet Airways collapse.

Tatas own two joint venture airlines – AirAsia and Vistara – in India. Both Jet Airways and Vistara are full service carriers.

Deal Between Tatas and Jet Airways
Air Asia

The Tata Group is reportedly looking for a significant stake in Jet Airways. Tatas had shown initial interest in buying stake in Air India but did not make any offer. According to industry experts, Jet Airways would be better proposition for Tatas than Air India. Tatas like other investors have to be watchful, as headwinds such as weak consumer sentiment, rising crude oil prices, a falling rupee and higher interest rates continue to be major bugbears.

There are speculations in aviation circles that the Tata Group has held preliminary talks for a stake purchase in Jet Airways, which would give struggling airline a lifeline and the Tatas are looking for a significant stake in Jet. If the Tata-Jet deal materialises, it would consolidate group’s aviation business.

However, the discussions have not made much headway  because there are a few sticking issues:

– Management control of Jet. The founder-chairman Naresh Goyal is known to be reluctant in diluting his 51 per cent stake and ceding control.Deal Between Tatas and Jet Airways

– Friction between Tatas and Goyal. Jet Airways is said to have resisted Tata-Singapore Airlines bid for Air India in 1990s. Jet as a member of lobby group had annoyed AirAsia and Vistara by opposing relaxation in overseas flying norms. (Also Read: 5/20 Rule)

– A negative school of thought. Jet’s loss will be Vistara’s gain. So there are some who believe Tatas will not bail Jet Airways out.

Both Jet Airways and Tatas have neither confirmed nor denied the news.

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