Jet Airways on Thursday confirmed that it is in talks with Gulf carrier Etihad Airways for a stake dilution.

Reports about Etihad's interest in Indian carriers Jet Airways and Kingfisher Airlines have been coming for a long time. But, none of the parties involved had confirmed reports until Jet Airways' yesterday's confirmation.

In a message to stock exchanges, Jet Airways said, "Jet and Etihad are in a discussion regarding a potential investment by the latter in the former."

However, the Indian carrier added that nothing was certain till the deal was signed, and that the Etihad's board could announce its final decision this week.

Sources say that Jet Airways will initially offload around 24 per cent stake. They also say that the Indian carrier will get a massive premium for the strategic deal as it is being valued at Rs 7,875 crore, while its current market capitalization is around Rs 5,239 crore.

Sources also say that Clasis Law is advising Jet Airways, while the Mumbai-office of law firm Amarchand Mangaldas & Suresh a Shroff (AMSS) is representing Etihad.

Stock in Jet Airways jumped 4.7 per cent to trade at Rs 606.85 a share at the Bombay Stock Exchange (BSE) on Thursday.