SpiceJet is not desperate to sell stakes immediately: CEO

Shares of SpiceJet rose around six percent on Tuesday on reports that Qatar Airways may pick up stakes in the carrier. However, the airline denied the reports on being speculative.

Neil Mills, the airline's CEO told CNBC-TV18 that the company is not desperate to sell stake. "We will evaluate available options  and only then will go ahead with any deal," he said.
In the same breath, he also said that SpiceJet is keen to get a foreign investor on-board. Referring to the on-going Jet Air-Etihad Deal which is almost in final stages of negotiation, Mills said international joint ventures and competitions does not worry him, but he is keen to maintain market share. The airline's share is around 20% with rivals  like Jet Air and Air India whose fleet size is more than double to that of SpiceJet.
Apart from Jet, even Kingfisher is learnt to be n talks with foreign investor after the government allowed FDI into the Indian aviation sector. The policy is aimed at helping cash-strapped carriers raise equity funds.
Among most carriers, SpiceJet is slightly better placed because the company's  majority stakeholder Kalanithi Maran has injected equity by increasing his stakes to 53.48%, but nevertheless the airline will need money to buy aircraft.
The no frills carrier has a market share of around 20% and its average load factors were around 75% in 2012. The airline reported an Rs 240 crore loss in September quarter against a 10 crore profit, year-on-year due to high fuel cost.
Meanwhile, the airline which announced a three day mega ticket sale last week raked in around Rs 160 crore from advance bookings, thereby securing decent load factors during the upcoming lean season. Mills said that the airline's load factors will improve by around two percent in the next three months due to 10 lakh seats which it sold at Rs 2013 in the offer period.

Below is the edited transcript of Mills' interview to CNBC-TV18. Q: Both Qatar Airways and SpiceJet have denied that they are looking at any kind of stake sell, but is SpiceJet interested or keen any kind of international collaboration that may also involve a stake sell from you all?
A: Yes. We have said before, that we are interested in getting in another partner, but it has to be the right partner. It cannot be anyone. We are not desperate. So we will keep looking at what potential partnerships are available for SpiceJet and probably then proceed with one in the longer term.
_PAGEBREAK_ Q: Are discussions underway at this point? In the sense, are you seeking or reaching out to any of the international collaborators right now?
A: No. What we are actually finding is that because of SpiceJet’s profile, particularly its balance sheet and the success that it has had in the last couple of years, we were being contacted by the other parties rather than us chasing them. So, it is a very good position to be in from our perspective. We are just evaluating what comes across the table, but serious conversations at this point have not really started. Q: While you may not be in a rush to consummate any such deal, you will concede that landscape is probably going to change if some of your key competitors do go ahead with the tie-ups that are being reported. Would you say there is a need to make an alliance for yourself as soon as possible in order to capitalise on the international landscape and as well hold your market share in the domestic market?
A: I do not think we are particularly at risk from that perspective. SpiceJet is a strong brand now. With the 20 percent market share that we now have, we do not need to do a defensive move. We do not have to do a collaboration just to defend ourselves. A collaboration that we would be looking at is to actually make SpiceJet better rather than defend the current position. We believe we are in a position to do that on our own anyway. However, certainly going forward we would look at how it could enhance our future prospects.

Q: You announced a big price slash a couple of days back. Why did you choose to do it? What kind of impact do you think it is going to have in terms of your load factor for those months?
A: The reason that we chose to do it was during the next quarter which is inherently weak quarter, particularly with the exam season through March, the entire industry will not be looking at anything beyond 75 percent load factor and even that, for a lot of carriers will be quite optimistic. We looked at that and asked why not actually give the travelling public the opportunity to buy those additional seats beyond the 75 percent normal load at a very low price. That basically made us very competitive, even with second class rail fares with the new enhanced phase on rail. So, that is really the reason we did it.  Perhaps it is just a marginal incremental business and it should affect the load factor by atleast a couple of percentage points for each month for the next three months. Q: Are airline companies beginning to face pressure on the passenger growth side? Your move prompted concerns that this is going back to the era where many aviation companies were falling over themselves to announce these price slashes and pricing was getting hit quite high in order to boost or bolster passenger growth?
A: No. I do not think it is correct that we are starting a fare war. We did not announce the sale well in advance, so it meant that people who had plan to travel had already booked during the normal profile. A lot of the people that booked, actually booked because of the short notice that we gave where a lot of people who did not intend to travel anyway. These were passengers that probably nobody would have had. It is not as if we are competing against passengers that somebody would have carried. We are just moving from one carrier to another. Also, on a fair wear and tear basis, I do not think that is really valid anyway. We all have to try and fill our aircrafts in some way and as long as competition is fair. It is done to make a profit at the end of the month. We are all financially accountable on that basis and competition helps to keep us all honest. As long as airlines are profitable or trying to be profitable rather than just chasing market share or load factor, I do not have a problem with a sale or competitive pricing at all.
Q: How is business progressing at any rate in terms of where load factors are right now? What is the market share of SpiceJet?
A: Our market share is continuing to grow. We have just crossed 20 percent and we will continue on that. But for us, market share is not something that drives our business. It is an outcome rather than an input. It is not something that we are chasing as a Key Performance Indicator (KPI). I cannot pay my stocks with market share. As long as we are big enough to be relevant, that is fine. If it is 20 percent, 18 percent or 22 percent, that does not make any difference to my shareholders and certainly none to my staff. It is a nice threshold to be at, but it does not make that fundamentally different. Q: Given the kind of traction you were talking about, any targets that you guys have set out for the year itself in terms of yields? Or where you think load factors will remain at generally?
A: With the cost environment that we have, at the moment for us to start giving projections either on load factor or on bottom-line would be very brave at this point. I will not be brave enough to actually give guidance going forward either on load or bottom-line just because the cost environment is still very tough particularly on fuel and it is something that we do need to keep looking at. We need to see how we can actually adjust it, so that the costs we pay in India for fuel are more in-line with international spending. Q: You did indicate that you are interested in tying up with a foreign party but there has been no headway yet. Considering the kind of routes that you are running internationally, does SpiceJet have a preference in terms of whether you would rather tie up with a party from West Asia? Or are you looking at expanding European presence. Any geographical leaning there?
A: No, not particularly a geographical leaning. What it is more important is that the investment will need to be on the basis of a partnership rather than just a pure financial investor. We will be looking at SpiceJet and whoever acquires a share in SpiceJet, both airlines get better by actually making the investment. If it is merely a financial investment, I can probably get a better multiple by actually going to a pure financial investor. So, for us it is more about creating a long-term partnership than just pure investor. As to geographical preference, I’d say no. It is more about whether we can actually get along with the people and see how we can actually create long-term benefits for both parties.