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Last Updated : Mar 28, 2019 03:55 PM IST | Source: Moneycontrol.com

Major airlines may choose to not bid for Jet Airways

Major Indian airlines will reportedly not be participating in the bid due to the high cost of acquisition, uncertainty over corporate governance and weak financial conditions.

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Companies in the aviation space are unlikely to invest in cash-strapped Jet Airways, which will be put up for auction soon, Business Standard reports.

Tata group, SpiceJet and InterGlobe Aviation (Indigo) will most likely skip bidding for Jet Airways, sources told the publication.

Major Indian airlines will not be participating in the bid due to the high cost of acquisition, uncertainty over corporate governance and weak financial conditions, they stated.

Moneycontrol could not independently verify the news.

On March 25, a State Bank of India (SBI)-led consortium of lenders agreed to provide Rs 1,500 crore in funding. The consortium owns about 50 percent of the airline after founder Naresh Goyal lowered his stake to below 10 percent.

“Under the current conditions, I see only major conglomerates as potential bidders,” an investment banker told the newspaper.

Also read: Naresh Goyal & Vijay Mallya: The contrasting tale of two aviation entrepreneurs

Tata Sons, the holding company of Tata Group, has decided that there will be no negotiations for a deal with Jet Airways without a complete due diligence, the report said.

'Legacy issues' and the origin of the airlines funding have been said to be cited as issues by the Tata Group. The conglomerate already operates Vistara and AirAsia India along with foreign players.

If SpiceJet were to invest Jet Airways, it would only add to its existing liabilities. “SpiceJet’s own current liabilities are at a historic high. Acquiring Jet Airways, which is almost twice its market capitalisation, will kill the company,” a source told the newspaper.

If IndiGo were to acquire Jet Airways, it would raise monopoly issues, since it already commands a 40 percent market share.

Etihad, which owns a 24 percent stake in Jet Airways, will decide on March 31 if it should make a fresh investment or exit its stake in the cash-strapped airline.
First Published on Mar 28, 2019 10:55 am
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