There could be a light at the end of the tunnel for India’s struggling Jet Airways. Two potential investors have been named – Tata Group and Mukesh Ambani’s Reliance Industries. However, neither have submitted an Expression of Interest, so is it really possible that Jet Airways could be saved?
For Jet Airways to start flying again, they need money, and fast. Already they are faced with the prospect of coming back into the market at a disadvantage; planes have been repossessed, airport slots have been lost and staff have been taken on by rival airlines.
With interest on their debts building with every day that passes, Jet need an investor to step in as soon as possible. That investor needs to be willing to take on the airline with all of its baggage, and to start seriously pumping some money in to get them back in the skies.
It’s a pretty tall order, but there may be a light at the end of the tunnel. Over the weekend, local media have reported that there are a couple of entities in the running to step in and save the beleaguered airline.
Mukesh Ambani’s Reliance
The first is Mukesh Ambani, chair and CEO of oil and gas giant Reliance Industries. With a net worth in excess of $54bn, he is the richest man in Asia and clearly has the means to bankroll even Jet’s fantastic debts.
But he’s not going into it alone. In fact, according to Indian press, Reliance haven’t even submitted an Expression of Interest (EoI) to the lenders at this stage. Rather, he is looking into going in with another bidder who has submitted an EoI, and that’s Etihad Airways.
Etihad already own 24% of Jet Airways but have previously said they are not keen to further bail out the airline. However, buying a bigger stake at a knock down price appears to be a more attractive proposition, as their EoI suggests. Under Indian rules, Etihad could increase this to 49% from their current investment. Any more than this would need to be government approved.
A Reliance spokesperson was contacted by the Indian Express for comment. They said:
“As a policy, we do not comment on media speculation and rumors. Our company evaluates various opportunities on an ongoing basis. We have made and will continue to make necessary disclosures in compliance with our obligations under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 and our agreements with the stock exchanges.”
Interestingly, Ambani has been showing plenty of interest in India’s other struggling carrier, Air India. Apparently, Reliance are considering bailing out the debt laden airline, or potentially taking a 76% stake as part of a consortium with, you guessed it, Etihad Airways.
While the presence of Etihad in the deal might make some nervous, Ambani is a hopeful looking savior for Jet. He and former Jet Airways Chairman Naresh Goyal have a close personal relationship; Goyal had previously approached Ambani to help Jet with their financial situation. Could Reliance be the angel investor that Jet Airways needs?
Salt to software conglomerate Tata Group are the second party who could provide a lifeline for Jet Airways. However, their involvement is rumored to be less of a positive possibility than the Reliance interest.
According to sources, the group would only be interested in buying the airline if lenders fail to find a buyer and end up dragging the carrier to bankruptcy court. An undisclosed insider talked to Mint, saying:
“If the ongoing sale process does not succeed, then there is a high possibility that the lenders will take the airline to bankruptcy. The Tatas have explicitly told Jet’s lenders that they will explore a deal once again only if it is available via the bankruptcy courts.”
Tata previously showed interest in buying Jet Airways but withdrew from the process once it became clear that Naresh Goyal would not cede control of his carrier. They were also upset that he had simultaneously opened talks with Etihad for the sale.
The Group does have some experience in the aviation world, having stakes in budget airline AirAsia India as well as full service carrier Vistara. While it’s good to see they have taken renewed interest in the airline, the fact they want to wait until bankruptcy has been declared puts something of a damper on things.
What will happen to Jet?
According to reports, four entities have so far submitted Expressions of Interest in buying the airline. We know one is Etihad, but the other three are being kept well under wraps.
The future of Jet Airways depends on these potential investors not only being willing to pay up for a sizeable stake in the airline, but also to stump up a large cash injection in the short term to get them back on their feet. Only time will tell if anyone is willing to take such a big risk.