India's Tata Group, the country's largest business conglomerate, has held preliminary talks to buy a large stake in struggling Jet Airways, the Times of India reported.
Jet Airways, founded by Naresh Goyal, has sought an equity collaboration, said the report, but Tata Sons, the parent of the US$103 billion business behemoth, has sought management control.
As extensively reported by CargoForwarder Global, Jet Airways is facing serious financial difficulties, with the airline delaying salaries to pilots and potentially defaulting on payments.
Tata has two aviation joint ventures, one with Singapore Airlines operating Vistara, and a second one with budget airline Air Asia. Vistara is a full services carrier competing directly with Jet.
A deal with Jet would help the Tatas scale up the aviation business in terms of network depth, fleet presence and market share, the report said. It added that the Tata Group would want to acquire at least 26% in Jet and such an acquisition would trigger an open offer to buy an additional 26% from Jet's shareholders, including Etihad Airways which owns 24% in Jet.
Differences over controlling rights
Earlier this month, the Abu Dhabi-based carrier made a US$35 million “cash pre-purchase payment” to Jet to improve its financials. But Etihad may sell all or part of its stake if talks with the Tatas progress.
The Times of India report noted, however, that several contentious points like management rights and the future role of Jet chairman Goyal could derail the talks, though both camps are exploring ways to take the discussions forward.
Goyal, who along with his wife Anita owns 51% of the Jet Airways shares, has held one round of talks with buyout investor TPG. But, the talks did not progress due to differences over controlling rights.
The Times of India also speculated that former IndiGo president Aditya Ghosh, who is now an advisor to Tata Trust’s cancer care initiative, may be tapped to pilot the airline business.
Loss making Air India is facing new challenges, despite new cash
Meanwhile, cash-strapped flag carrier Air India earlier this month received an equity infusion of Rs 1,000 crore (US$136 million) from the National Small Savings Fund (NSSF). The Indian government of Narendra Modi earlier gave the carrier a sovereign guarantee to raise Rs 3,500 crore as loan of which Rs 3,000 crore has so far been raised.
Although an airline official last week declared that Air India's financial position was now "slightly better" and the carrier has meanwhile undertaken a major cost-cutting programme, a Press Thrust of India report quoted chief executive Pradeep Singh Kharola as saying that turnaround efforts have become more difficult in recent weeks with overall increases in operational expenditure and fierce competition.
In a message in the October issue of 'Samvaad', a newsletter for employees, Kharola said that the airline was facing "fresh challenges in the form of rising fuel costs, a volatile currency and overall increase in operational expenditure - besides, of course, fierce competition."
Air India is estimated to have a debt burden of more than Rs 50,000 crore.
Nol van Fenema