International flying rights not in jeopardy: SpiceJet

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Moneycontrol Bureau

Beleaguered domestic carrier Spicejet has said that reports about the company’s international flying rights being in jeopardy were incorrect, and that its present fleet of 37 aircraft was well above the stipulated limit of 20 aircraft.

In a statement released Sunday evening, Spicejet said its dues to vendors was “significantly less than the Rs 1600 crore” quoted in some sections of the media. The carrier however did not say how much it owed its suppliers.

“The DGCA has not asked for all payables to be cleared by Dec 15, it has asked for a payment plan to be shared with them by Dec 15,” the company release said.

The company refuted reports that the recent reduction in its felt size had to do with the aggressive discounted fare sales strategy. Excerpts from the Spicejet press release:

“Our new business and pricing strategy, adopted in early 2014, looks to boost loads through advance purchase sales to ensure we fly as few empty seats as possible, and boost yields through close-in pricing. This is global best practice for LCCs, and SpiceJet’s advance discount sales strategy has resulted in revenue increase of 15% in the last quarter year-on-year, more than double the rate of capacity (ASK) increase.  It resulted in unit revenue (RASK) increase of 12% YOY for the quarter, a feat that is not easy to achieve YOY anywhere in the world.  It resulted in losses for the last quarter being reduced 50% year-on-year.  It has resulted in market growth of 15-25% YOY each month due to SpiceJet-led demand stimulation, with significant benefits to the travel ecosystem and the overall economy.  Once again, there is absolutely no connection between our operating performance and pricing strategy, and our current fleet re-sizing.”

The central government on Saturday had ruled out any state-sponsored bail out package for SpiceJet. Civil Aviation Minister Ashok Gajapathy Raju justfied the actions taken by the Directorate General of Civil Aviation against the airline including withdrawal of its unused slots for flight operations. "I don't think the government can afford to take on such loans onto itself,” he told CNN-IBN.

Spicejet shares surged about  a week back following billionaire investor Rakesh Jhunjhunwala’s purchase of 75 lakh shares of the company. However, the stock has given up those gains as the financial crisis in the company appears to deepening.