New Delhi: India’s budget carrier Spicejet needs $200-250 million to fund aircraft purchases in 2011-12 and will decide on the mode of funding shortly, its chief executive said on Friday.
The airline plans to add 11 aircraft to its fleet of 25 and raise the number of flights to 300 per day from 190 now, Neil Mills told Reuters over the telephone. The funds could be raised through share sale or export credit or both, he said.
Earlier in the day, Spicejet posted a 65% growth in FY11 profit to Rs101 crore on a revenue growth of 32% to Rs2,880 crore.
Spicejet shares gained as much as 5.6% on the results but shed all the gains to close 0.63% down in a Mumbai market that ended up 1.18% on Friday.
The new flights will predominantly be in the domestic space, though some international destinations would be included as well, mainly to South Asia and the Middle-East, Mills said.
Spicejet, India’s only profitable listed airline, expects new planes and “robust demand” to help it boost revenue by about a third in 2011-12. India’s domestic air traffic grew 18.4% in the first four months this year.
Massive capacity addition by Spicejet and its competitors though could result in overcapacity in India impacting fares and profits at airlines, already reeling under spiralling crude and fears of demand growth slowdown.
“It (overcapacity) would effect competition but not low-cost airlines like us,” Mills said, adding that low-cost carriers had become the preferred choice of fliers.
Rising oil prices -- coupled with unrest in the Arab world -- could wipe out airline profitability in 2011 and hinder the industry’s recovery, airline body Iata said last month.
International oil prices hit a 2-1/2 year high last month as unrest spread in North Africa and the Middle East and fanned concerns that supply could be disrupted.
Spciejet, controlled by Kalanithi Maran, who also owns media firm Sun TV , raised its market share in the domestic market by 1 percentage point to 13.3% in 2010-11, but lagged low-cost rival Indigo’s leap to about 19% from a similar level.
“The focus is on profitable growth, not market share,” Mills said, blaming the lack of growth in the first half of last fiscal for slower overall growth in market share.
Higher crude prices and intense competition among airlines has kept fares low in Indian skies and yields moderate.
“It’s been extremely challenging environment for yield and it continues to be so,” Mills said, adding he didn’t plan an immediate fare hike.