India’s Jet Airways said on Wednesday it is in talks with its lenders to resolve its debt problems, amid increasing prospects of a bailout by major shareholder Etihad Airways.

Shares in Jet, which has been hit by intense competition, a depreciating rupee and high oil prices and said it was now looking at a cash injection by stakeholders and board changes, closed more than 8 percent lower.

Representatives of the two airlines were due to meet with creditors, led by Jet’s biggest lender State Bank of India, in Mumbai to discuss a proposal that involves Etihad increasing its stake, a source familiar with the situation said. 

 

Domestic control 

However, India’s civil aviation secretary, R N Choubey, told reporters on the sidelines of a conference in Mumbai that control of Jet would need to remain in domestic hands.

“Under no circumstances will we allow the substantial ownership and effective control to be busted,” he said, adding that even if Etihad’s stake is raised to 49 percent, the regulator will need to be satisfied that control was local.

CNBC-TV 18 reported that Etihad had offered to buy Jet shares at a 49 percent discount and immediately release $35 million to bail out the troubled carrier, citing a letter to SBI from the Abu Dhabi airline’s CEO Tony Douglas.

Jet will not be able to fund its operations beyond the next week, the CNBC-TV 18 report cited Douglas as saying.

Etihad wants Jet’s founder and Chairman, 69-year-old Naresh Goyal, to step down from the board and his stake to be slashed to 22 percent from 51 percent, CNBC-TV 18 reported.

Under Indian capital markets rules, Etihad would be required to make an open offer to shareholders for a majority of the shares once its stake goes past 25 percent, something the Abu Dhabi airline is seeking an exemption from, CNBC-TV 18 said.

Choubey said that the ministry had not received a request from Jet and Etihad for such an exemption.

Jet’s chief executive, Vinay Dube, declined to take comment at the aviation conference in Mumbai, while an Etihad spokesman also declined to comment.

A source close to Jet said it will not take delivery of any more Boeing 737 MAX planes until a resolution plan is agreed.