Low-fare carrier SpiceJet Ltd, which counts Goldman Sachs Group Inc. as an investor, plans to sell $100 million (Rs440 crore) worth of new shares in the next two years to pay for aircraft it is buying from Boeing Co.
The airline will also use part of the money for working capital, B. S. Kansagra, a director, who owns 15% of the airline, said on Monday.
New Delhi-based SpiceJet has raised $175 million selling shares and convertible bonds in the past two years. Investors include Goldman, BNP Paribas and the Tata Group. SpiceJet has ordered 20 Boeing 737 planes.
The airline said last August that it signed an agreement to sell and lease back 16 Boeing 737 aircraft, valued at $1.1 billion, as part of a plan to finance the orders it made.
SpiceJet leased back the Boeing 737 planes it sold to the aircraft management unit of Babcock & Brown International Pty and Nomura Babcock & Brown Co. Bloomberg
SpiceJet leased back the Boeing 737 planes it sold to the aircraft management unit of Babcock & Brown International Pty and Nomura Babcock & Brown Co.
The unprofitable SpiceJet aims to expand its fleet to 18 planes by December 2007 from the current 10, Ajay Singh, an airline director said on 12 December. By December 2008, the airline plans to have 28 airplanes.
SpiceJet said in September last year its loss in the fiscal first quarter widened as expenses almost tripled because of expansion. Its loss in the three months ended 31August rose to Rs17.82 crore ($4 million) from Rs10.81 crore a year earlier.
India’s airports handled 51 million domestic passengers in the year ended 31 March, and traffic may grow by an average of 25% in the next five years, according to an October study by the Centre for Asia Pacific Aviation, an industry consultant.
Mounting competition has led start-up airlines to cut fares. Bangalore, India-based Deccan has sold some tickets priced as low as Re1 and GoAirlines has offered free tickets.
The losses are making airlines look for funding from new investors to buy planes from Airbus SAS and Boeing.
“India’s airlines definitely need more funding,” Nikhil Vora, an analyst at SSKI Securities Ltd in Mumbai said in a 24 January telephone interview. “There is a phenomenal growth happening and there are planes to be bought, so you need funds.”
Shareholders of SpiceJet on 12 January approved the sale of as much as $70 million of stocks to investors, including the Tata Group, Goldman Sachs and BNP Paribas.
SpiceJet received offers from investors for $118.5 million worth of stock in the carrier.
The carrier hasn’t worked out details of the latest fund- raising requirements, Kansagra said. SpiceJet said in August it hired Morgan Stanley for advice on financing aircraft purchases.