Cash strapped SpiceJet is finally in for some good news. US based distress fund owner WL Ross is set to pump in $80 million in the Delhi based low-cost Indian aircraft carrier, as per a news release on 15th July 2008.
Chief executive and Chairman of WL Ross, Wilbur L Ross Jr, thinks that the concept of a low-cost Indian airline is economically viable in the long run. He also expects the fuel costs to stabilize in near future.
Wilbur Ross in a interview with CNBC TV-18 has gone to the extent of pledging supplementary investment for SpiceJet in future, if need arises.
It is speculated that the Ross investment will comprise two main forms. They will pick up FCCBs and also current investor equity and fresh equity. The FCCBs are to be sourced from Istithmar and Goldman. Once these bonds are bought by Ross, SpiceJet can access the money locked against the said bonds.
The SpiceJet board is also expected to welcome in Ross as a part of the deal.
The final details of the transaction is expected to be released within the coming ten days. It may be noted that WL Ross is a part of Invesco, a global investment manager.
As per media reports SpiceJet had turned down a buyout offer from Vijay Mallya, Indian business tycoon and the owner of Kingfisher Airlines, earlier this month.
It may be noted that, WL Ross has already acquired premier Indian apparel manufacturer OCM in February 2007 for $37 million.
The aviation industry in India has been badly hit by the current hike in fuel prices. Air fares have gone up, passengers have dwindled and all airlines have suffered major losses. The value of the combined losses of the Indian aircraft carriers stand at $ 938 million for the fiscal year ending in March 2008. Apart from that cut-throat competition has also cut into the profit margins of the airlines.
On 14th July 2008, Kingfisher, Jet-Lite and Deccan Aviation announced a rise in fuel surcharges due to the high oil prices. However, SpiceJet and Indigo have abstained from any such increment for the month of July. This implies that the surcharge for these low cost carriers for the short and medium haul will stay put at Rs.2250 and Rs.2900 respectively for this month.
