As Tatas talk to Jet Airways, Etihad looks to drive a hard bargain

Even as talks between the Tata Group and Jet Airways advance, Etihad Airways may take the opportunity to press the exit button from the Indian airline.

The Middle-East aviation major owns 24 percent in Jet Airways. However, it will need some hard bargain from the Tatas, as Etihad wouldn't want to make a hasty and unprofitable exit.

"In all probability, the Tatas will have to buy out Etihad. But the airline itself will make sure that any sale of the stake makes business sense," said an executive from the industry.

Etihad had invested in Jet Airways in 2013, buying a 24 percent stake for about Rs 2,060 crore. The deal came soon after the Indian government changed a policy, allowing foreign airlines to invest in their Indian peers.

The Jet board had approved preferential allotment of 27 million shares to Etihad at Rs 754.74 a share. It was about a 30 percent premium on Jet's then prevailing share price.

Market conditions, and Jet Airways's precarious health, have seen the company's shares nosediving over 60 percent in one year. On Thursday, the company's stock was up 6.89 percent at Rs 275.50 a share, thanks to news on Tatas' interest in taking a stake.

Jet Airways reported a loss of Rs 1,297 crore in the second quarter of the year, its operations hit a rising crude and depreciating rupee. This was the third straight quarter of losses for the airline.

"It is unlikely that Etihad will agree for anything below Rs 700 a share. It will be in no hurry," said another executive from the industry.

Am email sent to Etihad remained unanswered.

Deal buzz

Etihad had strongly refuted reports of stake sale after consultancy firm CAPA said in March that the airline may exit Etihad by the end of this year. Etihad had then termed reports "speculative".

The deal buzz around Etihad though had started months before, in 2017. Executives in the industry said Etihad was keen to exit, even as Jet Airways was in talks with Delta Air Lines to raise funds through a stake sale.

But the talks, both with Etihad and Delta, seem to have petered out over differences on valuation.

Interests have renewed though, with the Tatas now pursuing for a deal with Naresh Goyal. Reports on Thursday pointed out that Tata Sons Chairman may present a plan to the board on Friday.

Executives had earlier told Moneycontrol that the Tata Group will look to merge Jet Airways with Vistara, the joint venture with Singapore Airlines.

"If the deal does go through, then it's unlikely that Singapore Airlines and Etihad would remain partners in the new entity," said the executive quoted above.