SpiceJet looks to acquire rival airline

New Delhi: Low-cost airline SpiceJet, which attracted $80-million investment from US billionaire Wilbur Ross last year, is looking to acquire a rival budget airline, and start international and regional operations, said its chief executive.
“We are looking at inorganic growth,” said SpiceJet chief executive Sanjay Aggarwal, adding that a low-cost airline will be his preferred choice for acquisition.
He expects a deal to materialise over the next 8-10 months, but declined to confirm if the Gurgaon-based airline was currently in talks with any rival for a possible acquisition.
There have been speculations in the past about SpiceJet holding talks with rival low-cost carriers, GoAir and IndiGo, to acquire them.
About its international plans, Mr Aggarwal said: “There are certain international markets in the Middle-East, South Asia and South-East Asia that are still underserved.” These destinations are close enough to be served by the existing fleet of SpiceJet, which just completed four years of operation and will be eligible to fly abroad after a year.
Mr Aggarwal said it makes sense for SpiceJet to go international because most of these international routes are served by full-service carriers that operate on a 30% higher cost.
The carrier is also evaluating the options of flying domestic regional routes. That means a new dedicated operation, as regional airlines connect smaller towns to metros and are not allowed to connect two metros.
It’s not clear how exactly SpiceJet would fund a possible acquisition. Mr Aggarwal said the company would be able to raise funds to finance any deal. Possibly, the company would be hinging on Mr Ross’s financial muscle to see any deal go through.
With the slowdown making travellers migrate to low-cost airlines, full service carriers such as Jet and Kingfisher are now shifting more planes to their low-cost divisions.
Mr Aggarwal, however, shrugged off the threat: “Only 7-8 of Jet and Kingfisher’s new low-cost flights overlap with ours. Therefore, there wouldn’t be any meaningful impact on us.”
02/06/09 Sanjeev Choudhary/Economic Times

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Categories: New Jun 2009, SpiceJet Jun 2009