Spicejet may sell stake to foreign carrier if FDI rules change

Spicjet on Friday reported a net loss of 2.4 billion rupees as fuel costs rose and there was no proportionate increase in fares due to intense competition

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Spicejet will evaluate selling stake to a foreign carrier if the government were to change foreign direct investment (FDI) rules, its chief executive said on Monday.

"We will evaluate it on the same basis as anything else. We are a business. We don't need a bailout, whether it's from a government or from a foreign airline," Neil Mills said, adding the airline was currently not in talks with any foreign carrier. 

India allows up to 49 percent foreign investment in Indian carriers but bars foreign carriers from picking up stake. But with most carriers suffering losses, the government is now mulling allowing foreign airlines to pick up stake in local carriers.

The Centre for Asia Pacific Aviation (CAPA) has forecast a record $2.5-$3 billion loss for Indian airlines for the year ending March 2012.

Kingfisher, India's second largest carrier by market share, may slide into bankruptcy if it is not able to raise fresh funds quickly.

"FDI (foreign direct investment) should be allowed because FDI by airlines is no different from FDI from any other company," Mills said.

Spicjet on Friday reported a net loss of 2.4 billion rupees as fuel costs rose and there was no proportionate increase in fares due to intense competition.

The company has been able to partly cover losses with the fresh fund infusion of 1.3 billion rupees by majority-owner Kalanithi Maran in October.

With this, Maran, who also controls media firm Sun TV , has reached the regulatory 5 percent ceiling of stake increase a year in Spicejet and has not proposed to increase any further, Mills said.

Mills said there was no immediate plan to raise funds and any fresh fund raising plan would depend on the extent of losses in the coming quarters.

SITUATION IMPROVING

The operating atmosphere is getting better as demand is good and fares are "gradually rising", Mills said, without giving any timeframe for the airline to come out of losses.

India flew 19 percent more passengers this year so far over last year as people continued to fly for business and leisure, but debt-crippled state-run Air India and Kingfisher, desperate to fill seats, have forced industry fares to remain low. 

Spicejet is No. 4 with a share of 13.4 percent in the domestic market with six players.

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