SpiceJet to launch international services

Kochi, Aug 21: SpiceJet plans to launch short-haul international services in 2008, if the government relaxes existing norms for domestic airlines.

''By next year, we expect to get a license to fly abroad,'' said its Director Ajay Singh. ''We'll fly shorter destinations in southeast Asia and the Gulf.'' Asked about the possible destinations, he said they have not been finalised yet as the government policy is not clear. "We have not finalised any destination. There is not much of clarity on the new aviation policy but we believe that the government has relaxed norms for minimum flying experience to three years from the earlier five years,'' said Mr Singh.

SpiceJet will complete three years of domestic operations in May 2008. The possible destinations for SpiceJet could be lucrative, heavy-traffic, short-haul destinations like Bangkok, Singapore, Kuala Lumpur besides, Guangzhou in China and those in the Gulf.

Within the country, said airline's executive chairman Siddhanta Sharma, the low-cost airline plans to connect Port Blair with Chennai and Bangalore by October 4. By the winter schedule which comes into effect by October-end, SpiceJet hopes to put Coimbatore on its network.

The airline is also planning cargo operations for light couriers with Hyderabad as its hub in the near future.

SpiceJet plans to raise up to 80 million dollars through a mix of equity dilution and debt to fund fleet expansion plans. The carrier will use funds to finance ten new aircraft worth around 450 million dollars, the deliveries of which will commence in 2009.

It currently operates 14 189-seater Boeing 737-800s. The number will go up to 19 by March 08 and 26 by December 08. The airline has over 89 domestic services daily to 15 cities: Delhi, Mumbai, Kolkata, Chennai, Hyderabad, Jammu, Srinagar, Jaipur, Ahmedabad, Pune, Bangalore, Goa, Varanasi and Kochi. SpiceJet posted 17.3 million dollars in losses on revenues of 184.8 million dollars in June 06 to March 07 period. However, in the April-June 2007, the carrier reported a net profit of 4.6 million dollars due to foreign exchange fluctuations on outstanding liabilities plus the sale of two aircraft. The company hopes to wipe out losses by October 08.

SpiceJet recently applied to the US Exim Bank for a 350 million dollar loan which will represent about 80 to 85 per cent of the fund requirement. For the remaining balance, the airline may decide to dilute 10 to 12 per cent equity to raise around 50 million dollars and resort to debt of 30 million dollars.

There are reports that the airline has been in talks with a host of private equity players. Dubai-based private equity firm Istithmar, which holds 13 per cent stake in the company, is keen to increase its presence. Currently, the Tata Group has 6.9 per cent stake in the airline.

Started in 1994 as ModiLuft Ltd partnering Lufthansa AG , the airline shut operations a few years later after its German partner walked out. It was later taken over by the non-resident Indian Kansagra business family in 2001 and renamed Royal Airways Ltd, only to be relaunched in 2005 as SpiceJet, a low cost carrier, with more investors joining in.

Despite consolidation and mounting industry losses, SpiceJet says it will not deviate from its existing low-cost model. It raised 70 million dollars by selling shares to the Tata group, Goldman Sachs and BNP Paribas to place orders for 10 Boeing 737 aircraft costing 700 million dollars at list prices which are to be delivered starting 2008.

UNI