Foreign players keen on SpiceJet; AirAsia no threat: CEO

Post theJet-Etihad deal, all eyes are set on Delhi-based SpiceJet  for a possible stake sale deal. Despite strong rumours that the carrier is in talks with Qatar Airways for the purpose, Neil Mills, the firm’s CEO has clarified that though foreign players have evinced interest in the airline, he cannot confirm any name as of now.

In an interview with CNBC-TV18, Mills said that the airline is not in active discussion with any global carrier currently and is also not in a hurry to offload stake. Read This:  How SpiceJet is likely to benefit from Jet-Etihad deal He further said, if SpiceJet gets into any deal, it will be multi-faceted and that the firm is mostly looking at strategic investment, which can boost its global and domestic network Mills does not see any threat from the proposed entry of Malaysia’s AirAsia in domestic skies. But certainly, he expects competition to get stiffer and he welcomes such an entry as it will boost efficiency of other carriers alike. In December quarter of FY13, the company reported stellar numbers with revenues climbing 32.7 percent to Rs 1602 quarter-on-quarter. It reported profit of Rs 102 crore versus loss of Rs 163.52 crore. EBITDA at 138.8cr vs EBITDA loss of 130.5 crore. Its average yield per passenger has gone up 29 percent YoY to Rs 4412 due to higher ticket prices. Its load factors are pretty strong at 75% versus 66.3% QoQ despite significant capacity addition. Overall Passenger growth is at 7 percent relatively much better placed compared to industry de growth of 3 percent from January to November. Below is the verbatim transcript of his interview to CNBC-TV18 Q: There has been considerable excitement in your stock since the Jet-Etihad deal went through. People are almost sanguine that you are next in terms of selling a stake to a global airline. Are you in discussions with any party for such a possible deal? A: We are not in any active discussions at this point in time. Certainly there are foreign players that are showing interest in us, but it is not something that we are actively pursuing. However, but it will probably happen over time. Q: What are you saying to interested parties that you do not want to do a deal right now or have there been any discussions with any aviation companies so far? A: We are not saying that we do not want to do a deal. What we are actually saying is that we will only do the right deal. So, we are not in any great hurry. What we will actually do is make sure the deal that we potentially do makes sense for both the companies and for the shareholders. That will certainly be something that might take a little bit more time for us to actually find the right deal, rather than just getting into any deal because it is available. Q: Can you confirm if any of the Middle Eastern airlines have expressed interest in SpiceJet? A: At this stage I am not going to confirm on any speculative rumours. When we are ready to announce a name or a deal then we will actually do that publicly rather than work through speculation. Q: What would be your primary motivation in doing a deal? A: The deal would actually have to be multifaceted. The strategic angle to make sure that SpiceJet’s extensive network across the country of 45 points in India certainly is clearly valued by the strategic partner. That would obviously show in what the value of the deal would be. However, also how we make sure that that actually adds value going forward, both for SpiceJet and for the partner. So we will have to make sure the deal is not just one way. Equity is obviously interesting. However, we could get equity just from a pure financial investor. Now we are actually more interested in making sure that a strategic investor is actually available. This will give us better value over time for the shareholders and for the company. _PAGEBREAK_ Q: We have been speaking over the last many quarters about how big a problem Aviation Turbine Fuel (ATF) prices have been for aviation companies. How much of a margin support are you getting now with the recent drop off in crude? A: The drop off in crude has happened, but what we have found in the past in India is that the mechanism to pass price increases on is almost perfect. So, as soon as price increases happen in international market prices increase significantly, but the mechanism to pass on price decreases does not seem to be quite as perfect.  It seems to have a huge delay, particularly from the oil companies in actually making sure that the crude price reduction actually comes through in ATF. So far we have not seen any significant reduction. We are hoping that the announcement that happens tonight on the next price increase reflects the full price change that has happened in crude over the last couple of weeks. Q: Where are load factors right now? A: We are very comfortable with the load factors. Up until the end of the third quarter we reported 75 percent. We are hovering around that sort of level. Those are numbers that are publicly available from the Directorate General of Civil Aviation (DGCA) and for us.  It is not something that is disappointing. That sort of level at a reasonable yield is fine. We do not have a problem with those sort of load factors. Q: Do you see the launch of Air Asia eventually with Chennai as a base being a significant threat to your operations? A: Air Asia is always going to be a logical competitor and logical competitors are more than welcome. They help to keep us all honest and up to speed and make sure that we are all as efficient as we can be. They are going to start with maybe 4 aircrafts; we have 52 today so it is hardly going to be a huge threat in the short-term. Ones who should more be worried are actually the weakest players in the market. I do not think one would normally worry that the next strongest player in the market is going to get influenced too badly in the short-term. We do not see Air Asia as being a significant threat. Q: How are your international operations shaping up right now? What kind of additions can one expect in the next few quarters? A: International operations are certainly shaping up significantly. We now have 8 international points and up to the end of December 7 percent of our revenue came from international. As we said then we want that to go up to about 20 percent in the next year to 18 months. So, that will certainly mean that international become a larger and large proportion of SpiceJet’s business. What we are seeing is that the point-to-point traffic from India there is a lot of demand from Indians particularly for four to five hour sectors. They want to fly direct not via an international hub. So, it is certainly something that is a big portion of our business going forward and something that we will continue to focus on.