The proposed acquisition by Jet Airways, India's largest private airline, of smaller rival Air Sahara for USD$500 million is likely to be called off, a senior Jet official said on Wednesday.

"The deal, if we do not extend it past midnight today, expires, and we are unlikely to extend the deadline," the official, who asked not to be named, said.

Jet proposed buying Air Sahara from privately owned conglomerate Sahara group in January. In March it extended the deal deadline by three months when it did not get regulatory approval for the purchase.

Indian media have speculated this week that the country's biggest aviation acquisition would fall through due to disagreements over valuation of Sahara and delays in regulatory approval.

Spokesmen for both Jet and Sahara were not available for comment.

When Jet said in January it wanted to buy Sahara, consultants Ernst & Young put Sahara's enterprise value at USD$750 million to USD$1 billion.

Despite the valuation, Sahara settled for USD$500 million, which analysts said reflected its eagerness to exit the competitive airline business.

Media reports this week have said Jet was still willing to buy Sahara but for 10 to 20 percent less than the initially agreed USD$500 million.

Jet shares, which lost nearly 42 percent in the wake of the deal announcement, jumped 5.1 percent on Wednesday. Analysts have said the acquisition would strain Jet's financial resources.