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Foreign airlines tentatively interested in SpiceJet: CEO

Ashwini Phadnis New Delhi | Updated on March 13, 2018 Published on May 31, 2012

Neil Mills

Till FDI is approved we cannot take it forward. The interest is from Gulf and South-East Asia which will make the most sense. — Mr Neil Mills, CEO of SpiceJet

A day after SpiceJet reported a loss of Rs 249 crore for the quarter ended March31, 2012, the airline's Chief Executive Officer, Mr Neil Mills, spoke to Business Line on a host of issues including what impacted the financials of the airline

Excerpts from the interview:

What has been the single largest contributor to an almost five-fold increase in losses?

There is obviously the on going fuel cost. But the proportion of fuel cost in this quarter is actually lower as compared to the last quarter. However, it is still 55 per cent of revenue even though that is better than the 64 per cent for the full year.

The depreciation in the Rupee must have hit you badly.

Unfortunately, a lot of our costs are dollar denominated and the revenue is Rupee denominated. So there is a natural imbalance. The weakening of the Rupee has had an impact on our operating costs. However, since the quarter ended about two months ago revenue has certainly improved from where it was.

How much has the revenue increased?

About 10 per cent.

Has this been because of increase in fares?

Fares have had to be increased in order to offset some of the increase in operating costs, particularly on fuel. But this increase in fares has been supply and demand driven. Unless oil and Rupee significantly strengthen, we will have no choice but for this to continue. What we have been doing is to stabilise the fares at the current level. That is where they are today (and not where they were at the end of March) and are at least holding at that level going forward.

How long is forward?

That depends on how long fuel prices remain where they are.

Will importing fuel directly as you plan make a difference to fare levels?

Ultimately it will but not a huge proportion. We will have to see how successful the import of fuel will be although we think it will be very successful. We are planning the first physical import of fuel in the beginning of July.

What percentage of the ATF uplift will be imported?

That really depends on how successful the first import is. Let us see what we are going to save. We are confident that it will become a large proportion of our total fuel.

Where are you going to import it from and who are your importers?

We have not finalised that contract at this stage. It will take a few weeks. Getting storage in India has been the biggest challenge. But we have pretty much got it sorted out now.

Will imported fuel be available at all stations?

First, we will do it at a few target stations and then roll it through the network.

A full year net loss of Rs 605 crore. How does it look going forward?

A: It looks positive, that is why we continue to grow within India. We certainly believe in the long term growth story.

Are you looking to return some foreign pilots?

No, that is not us. We are not looking at doing anything drastic. We will do things in an orderly and controlled way.

What does controlled way mean?

We have renegotiated a couple of our contracts for about Rs 20 crore of our current costs. It is a one-off cost where we are trying to get a better cost base going forward. We have also signed a long term engine agreement.

Is there investor interest in the airline?

We have been talking to a lot of potential investors. SpiceJet has a lot of interest from third party investors who are mostly international.

Have any airlines shown an interest in SpiceJet?

They have shown a speculative interest. But till FDI is approved we cannot take it forward. The interest is from Gulf and South-East Asia which will make the most sense.

Are you looking to add to your fleet during the year?

We added another aircraft last night. We will finalise how many we intend to take in during the year in a couple of weeks. Six to seven aircraft will probably be added this year.

Any date for starting new international destinations for which the Government has given permission?

A: As soon as we get permission from foreign countries. It took 15 months to receive permission from India so we need to give foreign countries a little bit of time to do their bit.

Will you look to add more city pairs within the country?

We are continuously growing. We have grown by 10 new airports in the last 12months.

The Budget opened the ECB window. Will you tap into that?

ECB is something that we will look at but it is not particularly attractive at this point in time. How can you borrow in dollars with the Rupee being as volatile as it is?

What has been the impact of Delhi airport raising its charges?

A: We will try and pass as much as possible to the customer but it will make us relook at how many aircraft we base in Delhi. Currently, there are 11 machines in Delhi. We have not taken a decision on where we will base the aircraft.

Published on May 31, 2012
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