Spicejet- Past ,Present & Future

While the markets have fallen drastically over the past two days, one stock that did well particularly in the last twenty four hours is the stock of Spicejet Airlines. However little has to do with its economic data and profits rather than the speculation over its future.

Major companies in India had been trying consistently over time to purchase a stake in Spicejet which is an airline that concentrates itself into providing services in the low cost airline sector. It competes with Jet Airways’ Jetlite service, Go Air and Kingfisher Airlines and previously with Air Deccan as well before they merged with kingfisher.

The problems for Spicejet have always been there. Operating a low cost airline in India has its perils especially if you don’t get it right. Spicejet made an ambitious start by providing air transport services between major cosmopolitans right in the beginning by slowly adding newer destinations overtime. It worked for sometime with its share reaching highs past the Fifty Rupee mark but that was a year ago when fuel was a lot cheaper.

Overtime Spicejet has continued to lose money. Negotiations therefore began for other companies to buy a stake in Spicejet to provide investment that would help them turn the corner. Anil Ambani of Reliance was interested in buying a huge stake but that deal did not work out. Vijay Mallya of Kingfisher in the meanwhile had been eyeing Spicejet for quite sometime. After his successful acqui-merger with Air Deccan, a buy of Spicejet would have undoubtedly made Mallya the king of the Indian low cost airline sector.

Spicejet finally decided to sell about less than 15% of its stake to Wilbur Ross And Company for an amount of $80 million. This will not only bring in the money but also allow them to operate under their own name. Something that wouldn’t have happened under Mallya or Ambani.

What is looking good for Spicejet is the fact that all their planes they have purchased from Boeing are around three years old. Their investment in their current 19 planes with another eleven on order are all from the Boeing 737-900ER or 737-800 models. The 900ER has a capacity to hold 212 while the 800ER can hold 189.

The robustness of these aircrafts ensures quality service at least plane wise. However Spicejet still has problems when it comes to finding pilots. This is a problem of turnover they have faced sector wise. Spicejet is known to provide employment to pilots who have retired from service in other countries due to the limit imposed on their flying age.

With fuel prices on the boil but an expected forecast by Wilbur Ross himself that they will indeed stabilize Spicejet can add more flights if not more destinations to their existing 95 flights nationwide. This is something Wilbur Ross thinks will do good for Spicejet and the Indian low cost airline sector as reflected in his statements on the same.

Whatever the case may turn out to be the current $80 million is a saving grace when converted into the Indian amount of 345 Crore rupees.

For now Spicejet has found one way of being able to survive.