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Spicejet may sell stake if FDI rules change

Spicejet may sell stake if FDI rules change
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First Published: Mon, Nov 14 2011. 04 01 PM IST

File photo of Neil Mills,CEO, Spicejet ltd.
File photo of Neil Mills,CEO, Spicejet ltd.
Updated: Mon, Nov 14 2011. 04 01 PM IST
New Delhi: Budget carrier Spicejet will evaluate selling stake to a foreign carrier if the government were to change foreign direct investment (FDI) rules, its chief executive said on Monday.
“We will evaluate it on the same basis as anything else. We are a business. We don’t need a bailout, whether it’s from a government or from a foreign airline,” Neil Mills told Reuters in a telephonic interview, adding the airline was currently not in talks with any foreign carrier.
File photo of Neil Mills,CEO, Spicejet ltd.
India allows up to 49% foreign investment in Indian carriers but bars foreign carriers from picking up stake. But with most carriers suffering losses, the government is now mulling allowing foreign airlines to pick up stake in local carriers.
The Centre for Asia Pacific Aviation (CAPA) has forecast a record $2.5-$3 billion loss for Indian airlines for the year ending March 2012.
Kingfisher, the country’s second largest carrier by market share, may slide into bankruptcy if it is not able to raise fresh funds quickly.
“FDI (foreign direct investment) should be allowed because FDI by airlines is no different from FDI from any other company,” Mills said.
Spicjet on Friday reported a net loss of Rs240 crore as fuel costs rose and there was no proportionate increase in fares due to intense competition.
The company has been able to partly cover losses with the fresh fund infusion of Rs130 crore by majority-owner Kalanithi Maran in October.
With this, Maran, who also controls media firm Sun TV , has reached the regulatory 5% ceiling of stake increase a year in Spicejet and has not proposed to increase any further, Mills said.
Mills said there was no immediate plan to raise funds and any fresh fund raising plan would depend on the extent of losses in the coming quarters.
Situation improving
The operating atmosphere is getting better as demand is good and fares are “gradually rising”, Mills said, without giving any timeframe for the airline to come out of losses.
India flew 19% more passengers this year so far over last year as people continued to fly for business and leisure, but debt-crippled state-run Air India and Kingfisher, desperate to fill seats, have forced industry fares to remain low.
Spicejet is No. 4 with a share of 13.4% in the domestic market with six players.
“I don’t think there is a capacity issue particularly.... The only carriers that are really struggling to fill their airplanes are those that are not reliable,” said Mills.
For the airline to stop making losses, Mills said, the “irrational pricing” by some airlines has to stop and Spicejet should get permission to fly overseas.
Spicejet already flies to neighbouring countries and has been awaiting permission to fly to 15 distant overseas destinations. International flights usually offer better margins as one can source low-cost fuel.
The budget carrier hasn’t cancelled any flight recently, Mills said, adding that the airline had secured more flying slots in anticipation of fleet expansion and would continue to add flights as new planes are inducted.
It flies 256 flights now and plans to raise it to 293 by March-end. India’s aviation regulator had said on Friday that Spicejet was flying 30 flights less than scheduled.
Spicejet plans to raise its fleet to 42 planes by March-end from 38 now and hire 300 staff to its existing 3,900.
Spicejet shares, valued at about Rs1000 crore, have lost 70% this year in market capitalisation, while the broader Mumbai market lost nearly 15%.
At 01:50 p.m., the company’s shares were down 3% at Rs23.55 on Monday in a little changed Mumbai market.
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First Published: Mon, Nov 14 2011. 04 01 PM IST
More Topics: Aviation | Spicejet | Neil Mills | FDI | CAPA |