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SpiceJet bets big on Bombardier fleet

Source : BUSINESS_STANDARD
Last Updated: Thu, Sep 15, 2011 21:01 hrs

SpiceJet, the low-cost air carrier majority-owned by Kalanithi Maran, expects its new fleet of 15 Bombardier Q400 next-generation turboprop aircraft—which it anticipates to be completely delivered by next July—to start contributing to its bottom line in 12 to 18 months from now, said chief executive Neil Mills.

Announcing the commissioning on Thursday of the first four Q400s for regional connectivity operations, Mills said the airline was expecting 75 per cent of this fleet’s capacity to be used.

, given the current demand for travel between Tier-II and Tier-III destinations.

The four 78-seater Q400s would connect Hyderabad with 12 Tier-II and Tier-III destinations—Aurangabad, Bhopal, Goa, Indore, Madurai, Mangalore, Nagpur, Pune, Rajahmundry, Tirupati, Thiruvananthapuram and Vijayawada. Commercial operations commence from September 21, with flights to Tirupati.

The inaugural all-inclusive fare to these cities starts at Rs 999. The limited seat offer is valid for bookings for the first 14 days of commercial operations.

SpiceJet had placed an order for 30 Q400 aircraft and took delivery of the first four early this month.

“We are buying these 15 aircraft with the $270-million funding from Canada's export finance agency, Export Development Canada. We have the option to induct 15 more, but we will exercise it later, going by the demand the current fleet generates,” Mills said.

Asked if competition in the regional sector would intensify, with more airlines, he said it would. “There will be competition but we have the lowest seat cost,” he said, adding SpiceJet saw significant opportunities in the sector, with the airline aiming at operating 100 flights a day with Q400s from March 2012.

Mills said the airline had applied for 10 more international routes and the wish list had been with the authorities for some time.

“We (SpiceJet) are in existence for over five years and entitled to new routes. There is a huge imbalance between India and foreign routes ... it is up to the civil aviation ministry to decide,” he said.

He said fuel price increase and irrational pricing by carriers would continue to affect the sector.

Stating the company would raise Rs 130 crore by next month, by issuing fresh shares at Rs 36 a share to its promoter, Maran, to cover operational losses and fund expansion, at a 50 per cent premium over the current market price, Mills said, “As of now, we have no plans to raise fresh funds.”

SpiceJet’s scrip fell 2.8 per cent to end at Rs 24.50 on the Bombay Stock Exchange today, over the previous close of Rs 25.20.



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