What Tata's ambitious Jet-Vistara-Air Asia combo would look like
The reports of Tata Group buying a large stake in the loss-making Jet Airways have set the tongues wagging. The salt-to-software conglomerate is reportedly mulling over buying 26 per cent stake in Jet, and another 26 per cent via open offer at a later point. The stake purchase is expected to make Tata Group the second biggest airline operator in the country after IndiGo in terms of market share, and third-largest in terms of fleet size.
The Tata Group already owns substantial stake in two carriers - 51 per cent in Vistara and 49 per cent in AirAsia India. With Jet under its fold, the Tata Group-owned airlines would have a combined market share of 23.6 per cent as compared to 41.9 per cent for IndiGo, as per August data. The fleet size of Tata Group-owned airlines would be 159, which is lesser than Air India Group's 176 (including Air India Express and Alliance Air) and IndiGo's 172 aircraft.
Surprisingly, the Tata Group-owned airlines would have far higher staff strength (18,774) as compared to IndiGo's 14,604 and Air India Group's 13,518, as mentioned in the DGCA's Handbook on Civil Aviation Statistics 2017/18. In fact, the combined personnel strength of the Tata Group-owned airlines would be over 32 per cent of the staff count of the sector. The higher staff strength also points out to the higher staff-per-aircraft ratio of 118 as compared to its peers - IndiGo's 84.9 and Air India Group's 76.8.
Tata Group's chairman emeritus Ratan Tata has been bullish on aviation sector for a long term, and the buying of stake in Jet would place the group in the top league within the sector. For Jet, it might come as a huge relief as the airline is currently in a financial mess. Since the beginning of the financial year, the aviation sector has been under stress. The rising aviation turbine fuel (ATF) prices coupled with depreciating rupee - which bumps up aircraft lease and maintenance costs - have severely impacted airlines like Jet. As a result, the airline has not been able to pay employees salaries on time.
As part of its survival plan, Jet was reportedly trying to raise capital by monetising its stake in the frequent-flyer programme - JetPrivelege - in addition to conducting sale and-lease-back of 16 wide-body aircraft - Boeing 777 and Airbus A330 - that the airline owns. Earlier in October, it received about Rs 258 crore from JetPrivilege for advance ticket sale.
Jet had a gross debt of Rs 8,620 crore as on June this year, and net losses of Rs 724.94 crore in 2017/18. The airline has a negative net worth of over Rs 7,000 crore. The airline is majorly (51 per cent) owned by chairman Naresh Goyal while Gulf carrier Etihad Airways owns about 24 per cent.
Till recently, several reports were suggesting that Etihad would perhaps increase its stake to 49 per cent (the cap for foreign carriers) and give a fresh lease of life to Jet. But with the Tata Group expressing interest in Jet - after missing out on a possible expansion opportunity with the purchase of Air India - it might be the beginning of a long-pending consolidation phase in the sector.