Tata Sons Ltd said on Friday it is in preliminary talks with Jet Airways Ltd and has made no proposal to acquire a stake in the debt-laden carrier, which has been imminent.
Shares in Jet Soared on Friday for a straight-up to a 5-month high after reports that a Tata was inching to a close.
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Agencies
What's good for Jet
With the Tata Group on the board, a number of topics related to Jet seems to be manageable, including over continuing operations. Also, a combination of Jet and Tata-SIAowned Vistara, with a market share close to 20 percent, will change the dynamics in India's airlines industry.
The Tata Group has been extremely ambitious and serious about aviation business, and its efforts and achievements in the industry. The often-quoted issues of corporate governance and lack of funds to support operations at Jet would be resolved as well.
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Reuters
What Tata might be getting into
For the Tata Group, with its brand equity and deep pocket, there are three key issues which need to be addressed. First, how would it be, along with cost-conscious partner Singapore Airlines, manage Jet's debt while also implementing strict cost control measures?
According to industry experts, there is scope for a huge reduction in staff and maintenance costs, where the country is at least 10 percent larger than InterGlobe, the operator of IndiGo. Another area for potential improvement is the number of hours that are used per day, which is smaller than its peers.
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Reuters
A force to reckong with
From the industry's standpoint, the post-merger of Jet's operations, the creation of a combined entity of a 20-cent market share would make it easier to compete with rivals and investors.
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AP
Domestic fares can rise
Analysts point out that IndiGo may have to relook at its strategy of weakening its rivals by adding capacity and keeping prices at others. This strategy is designed to reduce the risk of a financial crisis. Also, consolidation can take place in pricing and in the industry.
Text inputs: Jwalit Vyas, Rajesh Naidu, Sanam Mirchandani
