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SpiceJet on an expansion spree

Hyderabad. SpiceJet is looking at new airplanes, as their conservative growth strategy has reaped far more rewards than the rush towards going global like their floundering rivals. ”We plan to induct nine more aircrafts by 2012,” SpiceJet Chief Executive Officer Sanjay Aggarwal said on the sidelines of the 2nd International Exhibition and Conference on Civil Aviation, India Aviation 2010.

SpiceJet on an expansion spree-1The airline currently has 19 Boeing 737-800 and 737-900ER aircraft and operates 129 flights daily to 18 cities in India. The airline plans to break even by March-end this year. The airline currently has a market share of 13 percent in India’s aviation market. The carrier is also awaiting approval to expand internationally, with the carrier stating it expects approvals in April 2010 and the introduction of service in late May 2010.

“We plan to raise USD 50 million to USD 75 million in next six months,” Mr. Aggarwal said disclosing the company’s plan to raise the stake in market. SpiceJet has reported a profit of 1.08 billion in Oct-Dec against a loss a year ago. Thanks to the economic revival, the Indian aviation industry has taken off again, overcoming fears of being grounded for long by the threat posed by last year’s slowdown.

“We have appointed Edelweiss and IDFC to co-manage the process and they are working on it right now. We did investors meeting a couples of week ago and now the process is ongoing. They will review and ask questions. They are trying to understand the business model and the industry and in due course. The investors will make a decision,” explained Mr Aggarwal.

SpiceJet had received $100 million of foreign investment when US billionaire Wilbur Ross, who along with investment bank Goldman Sachs, invested in the airline in August 2008. Mr Ross’s money came in by way of foreign currency convertible bonds or FCCBs, while Goldmans Sachs has a 2.3% holding. The largest shareholder in SpiceJet is Kenya-based Kansagra family, which owns 13 per cent.

India’s domestic air passenger demand went up 35 per cent but capacity increased only 10 per cent in December, as per data from industry regulator Directorate General of Civil Aviation.

Mr Aggarwal says that continued improvement in demand will boost yields, or average fare per customer, to “mid-Rs-3,000” level from the current “low-Rs-3,000” level for low-cost carriers in second half of next fiscal year.

© India Strategic