* CEO says no firm talks pending foreign investment law
* Airlines eye India but competition may scare some off
* Spicejet says sticking to Boeing plane order
By Tim Hepher and Praveen Menon
DUBAI, April 18 (Reuters) – India’s Spicejet has
been approached by several Gulf-based and Southeast Asian
airlines but will not jump into negotiations before the
government reaches a crucial decision on foreign investment, its
chief executive said on Wednesday.
“We have been approached by several Gulf and Southeast Asian
airlines, all on a tentative basis,” Neil Mills, the loss-making
budget carrier’s chief executive, told Reuters.
India allows up to 49 percent foreign investment in Indian
carriers but bars foreign carriers from picking up stakes. But
with most carriers suffering losses, the government is now
mulling allowing foreign airlines to invest directly.
India’s cabinet is expected to make a decision on Foreign
Direct Investment (FDI) rules this week.
“There is nothing more serious than tentative talks to see
if we are interested. We have said that we are interested in
exploring any option for us that makes business sense but until
a decision has been taken on FDI there is no point in taking it
further,” Mills said in a telephone interview.
“Once we get regulatory confirmation in place then we can
see whether it makes sense to look at alternative funding
options. We are just talking about a concept until the law is
amended.”
He declined to name any of the airlines involved.
Dubai’s Emirates airline said earlier this week
it is studying new opportunities to buy foreign carriers if they
fit the Gulf emirate’s strategy, adding that it is interested in
an investment in India if carried out at the right price.
India’s embattled carriers have long lobbied for looser
foreign ownership rules.
Indian airlines are laden with $20 billion in debt and
probably lost $2.5 billion in the fiscal year that ended in
March, according to Centre for Asia Pacific Aviation, a
consultancy.
Kingfisher, India’s second largest carrier by market share,
is urgently seeking funds as it battles to stay afloat.
Despite the turmoil, industry analysts say India represents
a tempting prize for foreign airlines seeking access to its
market of 1.3 billion people.
However questions have been raised over how much actual
interest there would among international carriers for a stake in
Indian airlines given its brutally competitive market.
Access to Indian airports is limited by the fact that most
nations have used up their allotted traffic rights to India,
whereas part-ownership of an Indian airline could allow them to
take advantage of spare frequencies unused by India.
SpiceJet reported a net loss of 392.6 million rupees ($7.6
million) in the final quarter of 2011 compared with a profit of
944.5 million rupees in the same period in 2010.
The airline is controlled by Kalanithi Maran, who also owns
one of the country’s top media firms Sun TV.
ORDER BOOM QUESTIONED
Talk of India’s potential and low traffic compared to its
population stoked up a recent boom in airplane orders.
Mills raised doubts over whether all airlines would take
full delivery of a backlog of hundreds of aircraft currently on
order from Airbus and Boeing, but said he was
not worried about his company’s own airplane order from Boeing.
Spicejet operates Boeing 737 aircraft and has yet to take
delivery of 31 more worth $2.6 billion at today’s list prices.
Although aircraft are ordered years ahead, delivery is the point
at which most of their value must be paid.
“We have four or five deliveries a year up to 2019… We are
a long way from what you could call an over-ambitious level and
it is something we can comfortably manage and absorb,” Mills
said.
Spicejet’s needs for the next three years are covered by
leases from third parties. Aircraft ordered directly by Spicejet
from Boeing will arrive between 2014 and 2019, while some of the
leases expire during the same period, freeing up cash, he said.
The 737 and competing Airbus A320 are popular with low-cost
airlines. Unlike airlines including the world’s largest low-cost
carrier Southwest, Spicejet has not yet contemplated
buying Boeing’s latest model, an upgrade known as 737 MAX.
“The MAX is available from 2017. We have been talking to
them and they (Boeing) have approached us. But we haven’t taken
anything forward yet,” Mills said.
“The MAX is a concept. Once they have put a bit more meat on
the bones, we will look at it. Last time I looked it was all a
bit skinny.”
