New Delhi: The board of budget carrier SpiceJet Ltd will meet on Friday to take a call on buying an additional 15 Q400 turboprop aircraft made by Bombardier Inc. of Canada as it seeks to expand its domestic operations.
SpiceJet ordered 15 Q400 aircraft for its regional expansion in December last year with the option of purchasing an additional 15. Deliveries of aircraft ordered in the second round were to start in July 2012. The planes would cost $450 million (Rs 2,210 crore) at list prices although the airline can expect a sizeable discount.
The airline is reconsidering the option to go ahead with the order given its mounting operational losses.
“It’s one of the discussion points at the board meeting,” said an airline official on condition of anonymity. “We need to decide whether we need to put them up given the state of the industry or defer them by a year.”
An assessment report on the financial implications of going ahead with the order is expected to be submitted to the board at its meeting. A second official, who also declined to be named, confirmed that the board would discuss the Q400 order.
A Bombardier spokesman declined comment on the subject.
SpiceJet reported a loss of Rs 72 crore in the first quarter of the fiscal 2011-12. It’s expected to announce a loss in the second quarter as well, according to Kapil Kaul, CEO-South Asia at the Centre for Asia Pacific Aviation, an aviation consulting firm.
If SpiceJet chooses to buy another 15 aircraft, it will need to pay an upfront amount of $40 million even though Export Development Canada (EDC) will finance the deal, the first official quoted above said. EDC had also financed the first 15 Bombardier Q400s. SpiceJet used the first tranche of Q400s to connect 12 small cities and towns in south and central India to its network. The cities included Aurangabad, Bhopal, Goa, Indore, Madurai, Mangalore, Nagpur, Pune, Rajahmundry, Tirupati, Trivandrum and Vijayawada. It planned to connect west and north Indian cities to its network with the purchase of additional Q400s. SpiceJet competes with Kingfisher Airlines Ltd, Jet Airways (India) Ltd and Air India, which have so far controlled the profitable small-town routes.
If the board decides against buying more aircraft the airline’s expansion plans would be affected. The carrier will also need to renegotiate the delivery dates with Bombardier if it defers the order by a year, the first official said. SpiceJet, which commands a 14% domestic passenger market share, also plans to beef up its existing management team, this official said without giving further details.
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