SpiceJet to raise ₹5,000 cr in loans

Low cost carrier SpiceJet will raise up to ₹5,000 crore in loans, as it looks to expand its fleet.

In its annual report, the company said it wanted to create free reserves for up to ₹5,000 crore through loans by pledging its assets through various sources for business purposes.

In March, the low-cost carrier placed an order for 42 Boeing 737 Max aircrafts, valuing the deal at up to $4.4 billion.

CFO Kiran Koteshwar had earlier said in July the company plans to place an order, which would be its biggest ever, by the end of this financial year, and would look to raise fresh equity or debt to pay for the planes.

SpiceJet also said it could invest up to ₹100 crore for possible acquisitions, as it looks to improve its cost-effectiveness and profitability.

“The company is exploring various opportunities in the aviation sector and allied activities to ensure cost-effective operations and profitability. To exploit these opportunities, the company may invest in other body corporate by way subscription, purchase or otherwise,” the airline said.

SpiceJet has seen a turnaround since new Chairman Ajay Singh took charge in January. Despite losing market share, the airline was able to retain key routes and started re-building operations after the change of control and ownership.

After profitable operations in Q4 for FY 2014-15, SpiceJet has been able to increase its fleet and take advantage of the low fuel costs.

In the last fiscal, in order to stay afloat, SpiceJet fleet was reduced to 32 aircraft from 56 aircraft. The airline now has 41 aircraft and the management is continuously looking for opportunities to add more to keep up with the demand, SpiceJet said in its annual filing. The company seemed bullish about growth over the new few years.

It said the demand for air travel has risen steadily, with a CAGR of about 14 per cent over the years, despite inflationary challenges and economic slowdown.

FY 2014-15 saw a growth of nearly 16 per cent, over the last fiscal. The airline said it expected the demand to grow around 20 per cent year-on-year for the near term fiscal, and sees the industry’s potential to grow at around 10-12 per cent.

As a part of the strategy to reduce costs, SpiceJet said it implemented a “fuel management” program by which, in spite of increased payload (on account higher passenger numbers per flight, increased cargo loads), the fuel burn ratios are below last year’s numbers.

The company said it was also able to increase aircraft utilisation and was clocking “the near best in fleet category” utilisation across the world.

The airline is in process of implementing other cost reduction initiatives during this fiscal, and the most significant being the cost of acquisition on revenue generating assets.

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