New Delhi: Budget airline SpiceJet Ltd’s founder chairman Ajay Singh says the airline would like to consolidate its operations over this year to maintain the record profit it generated in 2015-16. Singh also spoke on the controversy surrounding issue of warrants to former promoter Kalanithi Maran. Edited excerpts.
You have posted a Rs.407 crore profit in the last fiscal from a loss the year before when the airline was about to shut down. How do you see this year?
If you see the Q4 (fourth quarter) numbers, these are record numbers for SpiceJet. Spicejet obviously has never made this level of profit ever. In terms of the full-year result as well, the highest SpiceJet has ever made in a full year is around Rs.101 crore; so even (at) Rs.407 crore, we have four times the highest profit of SpiceJet. We have taken a one-time expense in this quarter of Rs.173 crore; else, the Q4 number would have been very high but for this number and the reason we have taken this expenditure is that we want to basically clear up all our legacy issues. And what we have done with these results is that we have now completely cleaned up the past surrounding SpiceJet. Every single settlement has either been done or has been provided for, so we can start with a completely new slate now.
Can you break down this Rs.173 crore, where exactly has this been spent?
This is all practically to do with aircraft maintenance, engine overhaul and refurbishment of fleet. Pretty much what this does is all the backlog of engines in terms of whatever engines are now needed to be overhauled and whatever fleet needs to be refurbished, all that expenditure has been taken into account. So what has happened over last one year, we have done significant work in trying to upgrade the fleet, engines and cabins. Whatever remained—50% of the work—we have provided for all of that in this quarter.
You also said in the statement that you have renegotiated engine contracts?
That is an ongoing process; we are trying to still renegotiate contracts including engine contracts but in today’s situation, whatever remains to be done on the fleet has been accounted for in this quarter.
Fuel prices have been rising last few months. What is your outlook on it?
To a level, you can pass on the increase to the customer; we are hoping that fuel prices will not see great upside from here because macroeconomic situation is such that does not encourage very high fuel prices. We expect that they will remain in this range in the foreseeable future. The increase that has been, has been passed on.
What kind of cash are you sitting on?
We have zero debt at this time and whatever settlements remain which are very few in number have all been provided for. So, we have significant cash with us. About Rs.300-400 crore cash thankfully. It’s as good a situation as we could have expected to be one year ago.
You had to issue shares to former promoter Kalanathi Maran, how does that change the shareholding structure?
The issue is that Maran in 2014 had basically given a loan to the company which they converted into an advance against warrants. Now, they were not able to get clearance for issue of warrants when they were in management; so when the share purchase agreement was signed, we had agreed to allot warrants subject to approvals being received by us. Now, we have applied for approvals which we have not got. The Marans have gone to court and in the court, the regulators have said these approvals are not possible, these are against the rules. So now, the matter is in court and we will wait to see what happens in the court.
You have said in the past there would be an aircraft order of more than 100 planes but that has been delayed. When do you plan to make those orders?
Everyone keeps asking me for a date, I don’t want to give a date for the reason that we are working hard on it but need to get it completely right. Last one month has gone in replacing wet lease aircraft with dry lease aircraft. As soon as we are through with this process, we will focus on the aircraft order. We are hoping that we can do significant amount of work in July on this whole issue; once we are through with this whole transition from wet lease of aircraft to dry lease.
Most likely you are looking at August-September kind of a timeline?
But are you sure you will place an aircraft order?
You also mentioned about buying more regional aircraft? Is it a new board mandate?
No; it’s not a new mandate. We have been discussing it for a while. You know there is a civil aviation policy which focuses a lot on regional connectivity. We are the largest regional player in the market; so, we are looking at taking advantage of the leadership position in the space and we are speaking to three regional manufacturers as well.
Your Q400 regional planes have always been a problem...
Yeah, but they are also working to fix the problem. Q400 also has many advantages - it is a silent and comfortable aircraft. It’s also fast and has better technology. We are looking at all the three options and see what works well from a financial and operating perspective.
You sound very content one year into the airline. What is the vision for the next one year?
Yes. We have been through a phase where it was tough to survive. Now that we have gotten over that phase, it’s a year of consolidation. We need to make sure that we are solid, our balance sheet is in strong shape, that we can place these orders, that we can bring down costs structurally on a long-term basis. That we can continue to consolidate this operation and make it very solid over the next one year. We need to make sure that we can grow in a profitable manner. It’s important that we don’t grow to grow market share but in a manner that we continue to make larger profits.