New Delhi: Etihad Airways PJSC will decide this week whether to invest in Jet Airways (India) Ltd or Kingfisher Airlines Ltd, both of which are competing for a lifeline from the national airline of the United Arab Emirates (UAE) in return for selling an equity stake.

Abu Dhabi-based Etihad is expected to decide on a stake purchase in either of the two airlines at a board meeting this week, according to two persons familiar with development who requested anonymity. A deal is expected to be announced before the Christmas holiday, said a senior government official.

Talks between Jet Airways, India’s second largest airline by passengers carried, and Etihad have progressed, with the airline offering a 24% stake in the company, said one of the two persons familiar with the development quoted earlier. Jet is also offering Etihad a seat on its board of directors, the person said.

“The announcement could happen any time this week," the government official said. The Indian government, too, has received indications of a deal between Etihad and Jet Airways, he said.

The government in September allowed foreign airlines to buy stakes in domestic airlines that are strapped for cash and weighed down by debt and accumulated losses.

In a conference call with analysts, Jet Airways chief commercial officer Sudheer Raghavan said in November that the airline has a total debt of $2.3 billion (around 12,535 crore today), and it would be repaying $600 million by March. Kingfisher Airlines owed $2.5 billion to banks and majority shareholders as of 30 June, according to aviation consultant Capa.

A spokesperson for Jet Airways, Kingfisher Airlines spokesperson Prakash Mirpuri and an Etihad Airways spokesperson declined to comment for the story.

James Hogan, president and chief executive officer of Etihad Airways, told the Financial Times on 11 December that his airline was looking at a “couple of" opportunities in India and it was “going through the due diligence at the moment".

Kingfisher Airlines, which was grounded by the Indian aviation regulator in October after facing labour unrest over unpaid salaries and having to curtail flights for many months, has been working to swing the deal with Etihad its own way.

According to the two people close to the situation, an Etihad Airways board meeting on Tuesday ended inconclusively.

The board weighed the competing options—of taking a stake of up to 49% with operational control in Kingfisher Airlines and buying a minority equity stake in Jet Airways, with a wider network alliance.

Jet Airways seems to have the edge, one of these two people said.

Jet Airways works “better for Etihad Airways considering its network, though the latter is concerned with the changing regulations of the Indian government. Etihad Airways management is in favour of Jet Airways deal", said this person.

Jet Airways operates a fleet of 99 aircraft and connects 73 domestic and international destinations, including Abu Dhabi, Bangkok, Brussels, Colombo, Dubai, Hong Kong, London, Milan, New York, Singapore and Toronto.

After the Etihad board meeting, executives of both Jet Airways and Kingfisher Airlines met the management of the UAE airline and presented their cases, said this person.

The lobbying of Eithad is turning out to be another battle between Naresh Goyal, who runs Jet Airways, and Kingfisher Airlines chairman Vijay Mallya, except that they are this time both trying to sell, not buy. They had both competed to purchase Air Sahara, which eventually went to Jet Airways, in 2007.

“Then it was two buyers and one seller, so Sahara got a great price. Here, there are two sellers and one buyer, so the most eligible (candidate) will win. In respect of the books of the two airlines, Jet has a better chance," the government official said.

He said Jet Airways and Etihad Airways had agreed on a valuation.

Mallya, through Mubadala Development Co. PJSC of Abu Dhabi, is trying to convince Etihad to buy an equity stake in Kingfisher Airlines, offering it operational control, the second person said. Mubadala Development is the investment arm of the Abu Dhabi government. An email sent on Saturday to Mubadala Development did not elicit any response.

“Mallya had offered operational control, unlike Jet Airways, from Day 1 in Kingfisher Airlines for Etihad Airways. Kingfisher Airlines chief executive officer Sanjay Aggarwal and Mallya himself are doing the negotiations with Etihad Airways. Mallya has made presentations for restructuring the debt in case of a possible deal. The original idea was to announce (a deal) on Mallya’s birthday on 18 December," said one of the two people familiar with the development cited earlier.

Kingfisher’s directors discussed ways of improving the financial position of the company at a meeting on 12 December, the airline has told the BSE.

As of 30 June, the airline had accumulated losses of $1.9 billion, according to Capa. The airline’s lenders, led by State Bank of India, want Mallya to infuse capital before lending more money. The lenders are expected to meet next week to take stock of the situation.