The Hindu Business Line : Consolidation hopes buoy airline stocks

Stocks of SpiceJet, which is the focus of a takeover, rose as much as 22 per cent to Rs 30.45, gaining Rs 5.45 on a single day while that of Deccan Aviation rose the highest by 24 per cent to Rs 72.45. Jet Airways stocks rose 5.62 per cent to Rs 354.50.

Both Jet Airways as well as the UB Group, which owns Deccan Aviation, are learnt to have thrown their hats in the ring for taking a major stake in SpiceJet. However, sources in SpiceJet said that it may no longer be interested in either of the airlines picking up a stake after an offer from private equity investor, WL Ross & Co LLC.

The US-based firm has reportedly offered around $100 million for the airline’s working capital requirements. SpiceJet is learnt to be keen on accepting the offer from WL Ross as the company is known to be a turnaround specialist — something the airline needs badly after three straight years of losses.

SpiceJet posted a loss of Rs 133.51 crore during 2007-08, which was about 98 per cent more than the previous year.

Keen contenders

Both Jet Airways as well as the UB Group were keen to buy SpiceJet’s shareholders’ Mr Bhupendra Kansagara’s 12.91 per cent stake as well as that of Istithmar’s 13.42 per cent stake.

But SpiceJet management were reportedly not keen on UB Group right from the beginning because they feared that the group’s owner, Mr Vijay Mallya might start “interfering” with the airline’s character.

For Jet Airways (market share as of May, 2008: 20.5 per cent), the airline’s nearly 11 per cent market share would have allowed it to set prices in the market, apart from the natural synergy SpiceJet’s Boeing aircraft bring to the table.

An analyst with a brokerage firm said both the UB Group as well as Jet Airlines may not have given up yet as SpiceJet is too good an airline to be ignored.

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