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Business News/ Companies / SpiceJet need not raise money for plane buys
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SpiceJet need not raise money for plane buys

SpiceJet need not raise money for plane buys

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New Delhi: Budget carrier SpiceJet does not need to raise capital to fund its aircraft purchases from Canada’s Bombardier Inc , its chief executive told Reuters on Friday.

SpiceJet in November agreed to buy as many as 30 Nextgen turboprop aircraft from Bombardier for about $915 million. The initial order was for 15 planes.

The company, India’s most profitable airline, will fund the purchase through cash in hand and credit, Neil Mills said in an interview.

“From our point of view, we are looking at predominantly export credit funding...We are posting profits, options for funding have grown," Mills said.

“We are not looking at additional capital raising in the short term." he added.

SpiceJet shares, valued at about Rs2,790 crore, extended their fall on Friday afternoon to trade down as much as 11% at Rs61.20 by 2:20 pm.

The shares had been up 5% on Thursday morning on hopes the company would raise capital via a share sale at above Rs80 a share, according to dealers.

Mills said he expects the company to grow “well beyond" the industry average of 14-16% over the next 12-18 months, and load factor to exceed 80% in FY11.

SpiceJet will add 13 new planes to its current fleet of 25 planes in 2011, Mills said.

“I think budget airlines will grow at a big proportion. We are not only growing at the market pace, we are actually outpacing that."

SpiceJet, which operates two international routes as of now, may add one or two more such routes by summer, Mills said.

“We are not looking too far away from India...international is not a prime focus of our business," Mills said.

Disappointed investors

On Thursday, SpiceJet posted a 14% fall in profit for October-December, as higher fuel costs and taxes offset a rise in net sales.

“The difference here is we are paying taxes because me made profits for five consecutive quarters. We have to pay taxes, that’s life."

“I think what they (investors) have done is they have increased their expectations to a point which was unrealistic. While we delivered good results, they were expecting something miraculous."

On Thursday, Sharan Lillaney, an analyst with Angel Broking, told Reuters that SpiceJet’s quarterly results were “very good" and the prospects of the company going forward were bright.

India’s domestic passenger traffic grew 18.7% through January to December last year led by a burgeoning middle class in Asia’s third largest economy. Many Indian carriers are expanding their fleets on rising demand in India, where the economy is growing at nearly 9%.

Sun TV founder Kalanithi Maran and his unlisted aviation firm, Kal Airways Pvt Ltd, hold 38.6% of SpiceJet.

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Published: 28 Jan 2011, 02:07 PM IST
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