SpiceJet Fate in Indian Government Hands as Carrier Seeks Help
India’s government will decide on the future of SpiceJet Ltd. (SJET) after the budget carrier, which canceled flights and delayed paying staff this month, sought state support amid concerns it may wind down operations.
A decision will be taken “considering wider interest of passengers,” Mahesh Sharma, junior civil aviation minister, said in New Delhi. The airline sought state relief and Sharma’s ministry will seek opinion from the Prime Minister’s office, finance ministry and the oil ministry, he said. All flights were operating normally today, the company said in a statement today before presenting a financial plan to the government.
The situation at SpiceJet, owned by media billionaire Kalanithi Maran, highlights the difficulties of airlines in India, where base fares sometimes as low as 2 U.S. cents have contributed to over $10 billion in loss in the last seven years. Kingfisher Airlines Ltd. (KAIR), started by liquor baron Vijay Mallya, was grounded in 2012 after accumulating $1.4 billion of debt.
“Without significant and immediate promoter funding, I see no future,” Kapil Kaul, CAPA Centre for Aviation’s South Asia Chief Executive Officer Kapil Kaul said in an e-mail. “Two airline closures in the last few years and a very challenged SpiceJet highlights the massive structural challenges, which includes both external and internal faced by the industry.”
Nothing New
A financial proposal the carrier submitted to the government in a meeting earlier today didn’t give any new information regarding new investors and funds, an official at the Directorate General of Civil Aviation told reporters in New Delhi, asking not to be identified citing departmental rules. The government may decide on the airline’s fate as early as today, an official said.
The meeting with the government is “very crucial” for the company, according to a letter the airline sent to pilots earlier, a copy of which was obtained from a person with knowledge of the matter. “If all goes well,” then the airline expects to continue operations smoothly and as planned, Sandeep Varma, head of flight operations wrote. The airline’s senior management will brief employees “if all does not go well,” according to the letter.
Shares Slide
Varma disconnected two calls to his mobile phone and didn’t respond to a text message.
SpiceJet shares fell 7.8 percent to 13.55 rupees in Mumbai trading today. The official’s comment came after the close of trading. The shares have declined 23 percent this year. Maran and his company KAL Airways Pvt., together owned more than 53 percent of the airline, according to data compiled by Bloomberg.
Maran has invested about 13 billion rupees ($206 million) in the airline so far, including the 7.4 billion rupees that he spent buying a stake from Wilbur Ross in 2010 at 47.25 rupees per share, according to SpiceJet.
State-owned Air India Ltd., which has got funding from the government to offset its losses, and other airlines have struggled to make money in the Indian market, where the number of domestic travelers is projected to triple in the decade to 159 million people by 2021.
That growth has prompted carriers to order billions of dollars in new aircraft in the past decade from Airbus Group NV and Boeing Co. In March, the Chicago-based planemaker said it won an order for 42 of its 737 Max planes from SpiceJet, a deal valued at about $4.4 billion in list prices.
Wooing Investor
Rising incomes and a surge in the number of passengers have Singapore Airlines Ltd. and AirAsia Bhd. to start local operations. The challenge is how to make money while fares continue to drop even as costs increase.
SpiceJet reported five straight quarterly losses and tried for more than two years to woo an external investor to one of the world’s costliest markets for fuel, which accounts for as much as 50 percent of the costs for some Indian carriers
SpiceJet reduced its fleet of Boeing planes, delayed wages, and faced regulatory scrutiny after a spate of cancellations, including more than 160 flights days last week. The carrier is India’s second-biggest budget airline, lagging behind IndiGo.
India’s aviation regulator had barred SpiceJet from accepting bookings for travel in more than a month’s time, canceled 183 of its landing and parking slots and told the company to pay delayed salaries by Dec. 15, Bloomberg TV India reported Dec. 5. The airline responded by saying the restrictions on bookings were “counter productive” and it threatened to curb the company’s revenues.
Kingfisher, named after India’s best-selling beer, lost its flying permit and ceased operations in 2012. The company said in January it aimed to restart operations, though its license will expire at the end of this year if flights don’t resume by then.
That plan suffered a blow earlier this month when India’s government rejected Mallya’s reappointment as chief of the grounded airline in a rare veto after a bank named the carrier and some of its directors as defaulters.
http://www.bloomberg.com/news/2014-...e-decided-as-soon-as-today-official-says.html
India’s government will decide on the future of SpiceJet Ltd. (SJET) after the budget carrier, which canceled flights and delayed paying staff this month, sought state support amid concerns it may wind down operations.
A decision will be taken “considering wider interest of passengers,” Mahesh Sharma, junior civil aviation minister, said in New Delhi. The airline sought state relief and Sharma’s ministry will seek opinion from the Prime Minister’s office, finance ministry and the oil ministry, he said. All flights were operating normally today, the company said in a statement today before presenting a financial plan to the government.
The situation at SpiceJet, owned by media billionaire Kalanithi Maran, highlights the difficulties of airlines in India, where base fares sometimes as low as 2 U.S. cents have contributed to over $10 billion in loss in the last seven years. Kingfisher Airlines Ltd. (KAIR), started by liquor baron Vijay Mallya, was grounded in 2012 after accumulating $1.4 billion of debt.
“Without significant and immediate promoter funding, I see no future,” Kapil Kaul, CAPA Centre for Aviation’s South Asia Chief Executive Officer Kapil Kaul said in an e-mail. “Two airline closures in the last few years and a very challenged SpiceJet highlights the massive structural challenges, which includes both external and internal faced by the industry.”
Nothing New
A financial proposal the carrier submitted to the government in a meeting earlier today didn’t give any new information regarding new investors and funds, an official at the Directorate General of Civil Aviation told reporters in New Delhi, asking not to be identified citing departmental rules. The government may decide on the airline’s fate as early as today, an official said.
The meeting with the government is “very crucial” for the company, according to a letter the airline sent to pilots earlier, a copy of which was obtained from a person with knowledge of the matter. “If all goes well,” then the airline expects to continue operations smoothly and as planned, Sandeep Varma, head of flight operations wrote. The airline’s senior management will brief employees “if all does not go well,” according to the letter.
Shares Slide
Varma disconnected two calls to his mobile phone and didn’t respond to a text message.
SpiceJet shares fell 7.8 percent to 13.55 rupees in Mumbai trading today. The official’s comment came after the close of trading. The shares have declined 23 percent this year. Maran and his company KAL Airways Pvt., together owned more than 53 percent of the airline, according to data compiled by Bloomberg.
Maran has invested about 13 billion rupees ($206 million) in the airline so far, including the 7.4 billion rupees that he spent buying a stake from Wilbur Ross in 2010 at 47.25 rupees per share, according to SpiceJet.
State-owned Air India Ltd., which has got funding from the government to offset its losses, and other airlines have struggled to make money in the Indian market, where the number of domestic travelers is projected to triple in the decade to 159 million people by 2021.
That growth has prompted carriers to order billions of dollars in new aircraft in the past decade from Airbus Group NV and Boeing Co. In March, the Chicago-based planemaker said it won an order for 42 of its 737 Max planes from SpiceJet, a deal valued at about $4.4 billion in list prices.
Wooing Investor
Rising incomes and a surge in the number of passengers have Singapore Airlines Ltd. and AirAsia Bhd. to start local operations. The challenge is how to make money while fares continue to drop even as costs increase.
SpiceJet reported five straight quarterly losses and tried for more than two years to woo an external investor to one of the world’s costliest markets for fuel, which accounts for as much as 50 percent of the costs for some Indian carriers
SpiceJet reduced its fleet of Boeing planes, delayed wages, and faced regulatory scrutiny after a spate of cancellations, including more than 160 flights days last week. The carrier is India’s second-biggest budget airline, lagging behind IndiGo.
India’s aviation regulator had barred SpiceJet from accepting bookings for travel in more than a month’s time, canceled 183 of its landing and parking slots and told the company to pay delayed salaries by Dec. 15, Bloomberg TV India reported Dec. 5. The airline responded by saying the restrictions on bookings were “counter productive” and it threatened to curb the company’s revenues.
Kingfisher, named after India’s best-selling beer, lost its flying permit and ceased operations in 2012. The company said in January it aimed to restart operations, though its license will expire at the end of this year if flights don’t resume by then.
That plan suffered a blow earlier this month when India’s government rejected Mallya’s reappointment as chief of the grounded airline in a rare veto after a bank named the carrier and some of its directors as defaulters.
http://www.bloomberg.com/news/2014-...e-decided-as-soon-as-today-official-says.html
