By Aditi Shah and Stanley Carvalho
NEW DELHI/ABU DHABI (Reuters) - Etihad Airways has appointed turnaround specialist Alvarez & Marsal to conduct due diligence on Jet Airways Ltd as it weighs bailing out the cash-strapped Indian carrier, three sources familiar with the matter told Reuters.
Executives from Alvarez & Marsal are camped in Jet Airways' offices in Mumbai and are taking stock of the airline's operations and looking into its financial health and records, one of the sources said.
The Abu Dhabi-based carrier plans to raise its stake in Jet Airways from the current 24 percent but it wants the airline's founder and chairman Naresh Goyal to give up control, sources have told Reuters.
"Alvarez & Marsal are restructuring consultants. If they are there it means they are looking for stuff to cut," said a second person who is familiar with the matter.
An Etihad spokeswoman declined to comment. Alvarez & Marsal did not immediately respond to an email seeking comment.
Jet Airways did not respond to an email seeking comment but said last week it is in talks with lenders to resolve its debt problems. It is seeking a cash injection by stakeholders and will make board changes.
Jet Airways, which controls a sixth of India's booming aviation market, desperately needs a bailout. High fuel taxes, a weak rupee and price competition have squeezed profitability, leaving the airline with net debt of $1.13 billion.
Earlier in January it defaulted on a debt payment to a consortium of banks, led by State Bank of India (SBI), prompting ratings agency ICRA to downgrade the carrier.
The airline also owes money to employees, vendors and lessors - some of whom are considering taking back aircraft, sources have told Reuters.
Jet Airways brought on board two global consultants last year who also have people working out of the airline's office in Mumbai, the first source said. McKinsey is helping with cost-cutting efforts and Boston Consulting Group (BCG) is looking at ways to increase revenue, he added.
McKinsey did not respond to an email seeking comment. BCG said it would not comment on any company specific matters.
Representatives of both airlines met with creditors, led by Jet's biggest lender SBI, in Mumbai last week to discuss a proposal that involves Etihad increasing its 24 percent stake, a source told Reuters.
The Abu Dhabi carrier can go up to a maximum of 49 percent according to India's foreign ownership rules for airlines. Also, if it breaches the 25-percent mark it must adhere to strict capital markets rules.
The markets regulator, Securities and Exchange Board of India (SEBI), said on Thursday it had not yet expressed any "view" on giving such a concession to Jet or Etihad.
(Reporting by Aditi Shah in New Delhi and Stanley Carvalho in Abu Dhabi; Editing by Martin Howell and Elaine Hardcastle)