In airline investment, Wilbur Ross bets on lower oil prices

New Delhi: Wilbur Ross Jr.'s latest deal, an $80 million investment in the flailing Indian airline SpiceJet announced Tuesday, is hardly earth-shaking. But the idea behind it is.
Ross, a contrarian, has decided that high oil prices have hit bubble territory, a bubble that should pop in the next 12 months. In the search for new investments, "we're looking at everything that has been hurt by fuel," he said by telephone Tuesday.
To that end, his firm, WL Ross, which has an estimated $7.9 billion in assets under management, has bought up stakes in railroad freight companies in Europe. It is looking at refineries, gas station chains and even the faltering United States airlines industry.
"The fundamentals don't justify an oil price over $100" Ross said. "It is the nature of bubbles that they expand farther and last longer than anyone logically imagined," he said, but "they always reverse."
Exactly when and where the oil price bubble will burst is still unclear, he said, but he said he thought it could be within the next year.
On Tuesday, SpiceJet said Ross's firm would invest 3.45 billion rupees, or $80 million, in the company, a three-year-old, low-cost airline whose stock has dropped more than 50 percent this year. Ross will take a seat on the SpiceJet board, and said he could invest more capital if necessary. SpiceJet's shareholders include the Dubai investment company Istithmar and banks including BNP Paribas, HSBC and UBS.
15/07/08 Heather Timmons/International Herald Tribune, France

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Categories: Foreign Jul 2008, SpiceJet Jul 2008