Government Has Asked Tata To Help Rescue Struggling Jet Airways: Report

Prime Minister Narendra Modi's government has sought Tata Sons Ltd.'s help to rescue struggling Jet Airways India Ltd., people familiar with the matter said.

Tata Sons is in talks with the government about a potential haircut to state-run banks on Jet's loans as part of the plan, while Airports Authority of India may forgo some of its dues, one person said Thursday, asking not to be identified as the talks are private. The Tata Sons board is due to deliberate on the matter Friday, the people said.

The structure of the potential deal has not been finalized, they said. One option is to combine Jet with Vistara, an airline venture Tata runs with Singapore Airlines Ltd., one person said. Economic Times said earlier that the companies are weighing a potential all-stock merger of the carriers -- something Jet said was speculative.

Jet shares rose 24 percent, the biggest single-day gain on record, to close at 320.90 rupees in Mumbai. A Tata spokesman declined to comment, while an aviation ministry spokesman did not answer multiple calls and a text message sent to his mobile phone.

Any investment by Tata Sons will catapult the group to the top league of Indian aviation, dominated by budget carrier IndiGo, while providing a lifeline to Jet, which is falling behind on payments to lessors and staff. A deal that prevents the airline from going bust will save PM Modi the embarrassment of a business meltdown ahead of a general election due early next year.

Kingfisher Collapse

Kingfisher Airlines, founded by beer tycoon Vijay Mallya, ended operations in 2012 after failing to clear its dues to banks, staff, lessors and airports. SpiceJet Ltd. almost collapsed two years later before its founders returned to gain control and revive the company.

A deal with Jet Airways, in which Abu Dhabi's Etihad Airways PJSC owns a 24 percent stake, will give parent Tata Group access to some lucrative assets in the aviation business -- including landing and parking slots in airports from Bangkok to Amsterdam, a large fleet of aircraft, and an established domestic network based in Mumbai.

One obstacle to Jet-Vistara combination could be the difference in fleets and brand identity, which might mean keeping the two separate in the shorter term, one person said.

Tata Sons also runs a local low-cost airline with Malaysia's AirAsia Group Bhd. The two existing Tata-operated carriers had a combined Indian domestic market share of 8.2 percent in September, versus Jet's 15.8 percent, a figure which stood at 35 percent a few years ago.

Fare Pressure

Jet Airways is struggling to survive in a market where intense competition has depressed fares and high fuel prices, made expensive by local levies, negate gains from a surge in travel. The company reported its third straight quarterly loss Monday with surging liabilities that signaled a deepening of financial distress. A weakening rupee also added to its woes.

Losses at Indian carriers will balloon to as much as $1.9 billion in the year ending March 2019, and they need to raise more than $3 billion in working capital in the near term, according to Sydney-based consultancy CAPA Centre for Aviation. Most of them have cash balances that can cover expenses for only two to three weeks, according to CAPA.

A deal between Tata and Jet Airways won't change those dynamics immediately, said Rahul Kapoor, a transportation analyst for Bloomberg Intelligence.

"Tata Group's white-knight act to take a stake in Jet Airways is unlikely to alter the Indian aviation market," he said. "Perennial weak profitability and competitive intensity will remain a bane for the foreseeable future."

Jet failed to make a profit in nine of the past 11 fiscal years. Besides pledging to cut costs, its board in August proposed to pare debt and sell its stake in JetPrivilege, a loyalty program. There's plenty of interest in the Jet Airways brand, Chief Financial Officer Amit Agarwal said on a conference call Tuesday.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)