Tatas eye stake in Jet Airways: Here's why the deal may not fructify

Tata Group is reportedly looking for a significant stake in Jet Airways

Tata Group has held preliminary talks for a stake purchase in Jet Airways, which would give struggling Mumbai-based airline a lifeline.

However, the discussions have not made much headway with management control of Jet being a sticking point, it is learnt.

Jet Airways is facing a cash crunch, resulting in salary delays and grounding of planes. It has been looking to raise funds through stake sale in its loyalty programme and fresh issue of shares in the company.

Discussions have been held with private equity firms Blackstone and TPG and also with Etihad Airways, which owns 24 per cent stake in the airline.

Preliminary talks were held with Tatas too but any stake sale in the airline depends upon Jet founder-chairman Naresh Goyal diluting his 51 per cent stake and ceding control, according to sources in the know.

A report in Times of India paper said Tatas are looking for a significant stake in the airline. Jet Airways has called the news "totally speculative" while Tata Sons declined comment.

If the Tata-Jet deal fructifies, it would consolidate group's aviation business. Tatas who own two joint venture airlines (AirAsia and Vistara) in India had shown initial interest in buying stake in Air India but did not make any offer. Eventually, the Air India disinvestment was put off by the government as it did not receive any bids.

According to industry experts, Jet Airways would be better proposition for Tatas than Air India. Jet Airways is the largest airline on international routes to/from India with a large network and slots at key airports.

But a deal would be difficult given the friction between Tatas and Goyal. Jet Airways is said to have blocked Tata-Singapore Airlines bid for Air India in 1990s and is a member of lobby group which has opposed relaxation in overseas flying norms, much to annoyance of AirAsia and Vistara.

However, there are some who believe Tatas will not bail out Jet Airways. "Vistara will gain significantly if Jet Airways goes down," said an expert.