The ongoing saga over India’s Jet Airways has taken another twist with its founder Naresh Goyal, reportedly agreeing to sell his controlling stake and give up operational control of the 25-year old, struggling carrier.
Jet Airways has been grappling with financial difficulties that have also resulted in the full-service carrier delaying payment of salaries to staff, including pilots. The airline posted a loss of INR 1,261 crore (USD 180.4 million) in the three months ended September.
Goyal is said to have met all three prospective buyers – Tata Group, Etihad Airways PJSC and a consortium of Air France-KLM and Delta Air Lines Inc. – television news channel CNBC TV18 reports, citing multiple people familiar with the matter.
Goyal has, however, laid out certain conditions to selling his 51 per cent stake, including retaining a minority stake of below 5.0 per cent and a board seat on the firm, livemint reports.
Tata was early on marked as the likely buyer and indeed eventually acknowledged it was in discussion to acquire Jet Airways.
Media reports earlier this month suggested that Tata Sons Ltd was mulling a two-step deal to acquire Jet Airways. This would see Jet merge with Tata SIA Airlines Ltd – the Vistara premium domestic airline joint venture between Tata Sons and Singapore Airlines – through a share swap in the first phase.
This would then be followed by Singapore Airlines buying out Goyal’s majority share. Tata Sons is the investment holding company of the USD 103 billion salt-to-software conglomerate.
Just last week Tata Sons confirmed that the Group is in preliminary talks with Jet Airways, but the Times of India reported that Tata’s board is in no hurry to seal the deal over concerns of the carrier’s debts. “You can’t rush into a complex situation that could cost the group up to INR 143.21 billion (USD 2.0 billion) without doing serious homework,” the newspaper quoted one source as saying.
A key consideration is the fact that Etihad Airways owns a 24 per cent stake in Jet Airways. Indian media report that industry talk has been centering around the possibility that Etihad was looking to possibly double-down on its ownership stake in exchange for a desperately-needed cash infusion into the airline.
Jet Airways dismissed such notions as “speculative” in a regulatory filing last week. Goyal is also said to prefer a deal with Etihad over the one being discussed with Tata Sons.
The Economic Times, citing sources close to the issue, reported that Goyal and his team met with a top management team from Etihad, headed by Group CEO Tony Douglas, last Sunday. This was followed by long meetings with Jet’s management at Goyal’s Dubai residence.
That potential deal is expected to see Etihad injecting new equity into the airline, holding as much as 49 per cent in the expanded equity base, while Goyal open to his stake being diluted from the current 51 per cent to as low as 15 per cent, depending on the extent of the cash infusion, the newspaper reported.
Etihad has not only its equity investment to worry about, but a passenger feed from Jet which BusinessToday says is nearly 11 per cent of Etihad’s passengers originating from India. Etihad rival, Emirates currently has a market share of nearly 18 per cent of passengers flying from India to the Gulf.
Etihad, itself struggling financially, is no doubt looking at the developments carefully, given its dubious track record in investing in other struggling airlines, including Air Berlin and Alitalia, both of which resulted in substantial losses for the Abu Dhabi-based carrier.
Jet Airways operates a fleet of 124 aircraft including 10 B777-300ERs, eight A330-2/300s and the remainder narrowbody aircraft, mostly B737 family. The carrier also has orders for 10 B787-9s and a whopping 145 B737 MAX 8s and 75 MAX 9s.
Jet recently set an Indian aviation record and very nearly a world record for uplifting 45 tonnes of cargo in the passenger belly of one of its B777-300ERs from London to Mumbai. Only two other international carriers have exceeded 40 tonnes on the same aircraft.
Jet Airways and Air France KLM have a passenger code share that expanded into a Memorandum of Understanding (MoU) on strengthening their existing cargo cooperation last year.