Tata Sons board may meet today to consider proposal to bid for cash-strapped Jet Airways

Will the beleaguered Naresh Goyal-owned Jet Airways be acquired by the Tatas? The board of Tata Sons is likely to meet on Friday to discuss a proposal to take over the Naresh Goyal-controlled Jet Airways, which is looking for investors to tide over liquidity crunch that it has been saddled with, according to people familiar with the development.

The purchase of airline could transform India’s largest conglomerate from airline fringe player into the country’s dominant, full-service international carrier.

Airline's deputy chief executive and chief financial officer Amit Agarwal earlier this week had admitted that the company was in talks with "multiple interested parties" for fund infusion as well as selling six of its Boeing 777 planes and a stake in its loyalty programme Jet Privilege.

"Tata Sons board is meeting tomorrow (Friday) to consider the proposal to bid for Jet Airways," people in the know of the development told PTI.

While a spokesperson of Tata Sons, which already runs two airlines-- the full-service carrier Vistara in a JV with Singapore Airlines, and the low-cost carrier AirAsia India in JV with Air Asia of Malaysia, refused to comment on "speculation," Jet did not respond to PTI queries on the same.

Representational image. Reuters.

"We do not comment on speculation," a Tata Sons, which originally owned the present national carrier Air India, the spokesperson said when asked for confirmation.

Besides Goyal, who along with his family owns 51 percent stake in the carrier, Gulf carrier Etihad Airways holds 24 percent stake in the cash-strapped airline which earlier this week reported Rs 1,261 crore loss for the September quarter against a profit of Rs 71 crore y-o-y, making it the third straight quarters of heavy losses.

This had the airline also putting as many as six of its Boeing 777s on sale to part-fund liquidity.

Media reports suggest that the parent company of Vistara, Tata-Singapore Airlines, is looking at an all-stock merger with Jet Airways as part of the Tata group's plans to board Goyal's full-service carrier.

In an exchange filing, Jet Airways described the media reports as speculative.

"...the subject news is speculative in nature and that there is no discussion or decision in the board which would require a disclosure...," the airline informed BSE.

According to reports, the two sides are inching towards a two-step transaction that would first see Jet Airways merging with Tata-SIA that runs Vistara through a share swap to form a new JV, which will have the Goyal family, Etihad, Tata Sons and Singapore Airlines as its partners.

"We are currently at various stages of discussions with multiple interested parties for both part stake sale in Jet Privilege and fresh equity infusion," Agarwal had told analysts during the post-earnings concall on Tuesday.

He had also said the company hired investment bankers and consulting firms to carry out these tasks.

The cash paucity in the country's second-largest airline by market share has resulted in delayed payments to some vendors and salaries to a section of its over 16,000 employees.

India's aviation market

India’s airlines are increasingly looking abroad in search of better returns as price competition intensifies domestically, while a weaker rupee and rising fuel costs have wrought havoc on the finances of carriers such as Jet.

Nevertheless, India’s aviation market is likely to clock an annual passenger growth rate of 10 to 12 percent this year on international flights and 18 to 20 percent domestically, showed forecasts from aviation consultant CAPA.

“Despite the challenges faced by the aviation sector, the wider macro-economic conditions remain strong,” CAPA said in a client note. “With airlines offering low fares, demand for travel will be stimulated.”

As well as Vistara, Tata operates low-cost domestic carrier AirAsia India along with AirAsia Group Bhd. Group company Tata Consultancy Services Ltd also handles the backend operations for carriers including Singapore Airlines, British Airways and KLM Royal Dutch Airlines.

(With inputs from agenices)