Jet Airways is reportedly in talks with Etihad Airways to raise funds as the airline looks to offload its huge debt burden.

If the deal goes through, Etihad stake in the Naresh Goyal-promoted airline will go up to 49% from 24%. Etihad had bought 24% stake in Jet Airways in 2013 for $332 million.

Jet Airways is looking to raise $300-400 million via convertible bonds in the current deal, sources familiar with the matter told The Economic Times.

Both the parties are in negotiations on the valuations and the deal may be finalised by 31 March 2016, according to a source. The conversion of bonds could happen during 2018-19 period.

Sources said the airline will utilise the funds raised from the stake sale to trim its debt, apart from using a part of it in expanding operations. Jet Airways has a debt of $1.7 billion or Rs 11,000 crore.

However, an expert said that the deal could face troubles in getting approval due to the "sensitivity" of the aviation sector even as the foreign direct investment (FDI) in the sector is permitted up to 49%.

Etihad also encountered some regulatory issues in Europe in the past when it attempted to raise stake in other carriers, according to an aviation industry expert.

In a surprising move, Jet Airways' Chief Executive Cramer Ball resigned last month, which the airline had said was due to "family reasons". Ball was appointed CEO of the airline at the request of its partner Etihad Airways.

Under Ball's management, Jet Airways was able to turn profitable in the April-June quarter last year. The turnaround was also driven by falling jet fuel prices.

Jet Airways earns over 55% of its overall revenues from the international routes as it faces less competition in the segment.

But with the entry of new carriers Vistara and AirAsia, the domestic aviation landscape has undergone a sea change, resulting in increased competition to Jet Airways.

Share prices of Jet Airways traded over 2% higher at Rs 754 on the Bombay Stock Exchange (BSE) on Wednesday and even as the benchmark indices remained almost flat.