SpiceJet to lease more planes, new CEO set to take over soon

Sept. 9, 2010


Sept. 09--The entry of media baron Kalanithi Maran of Sun TV Network Ltd has increased the speed of decision-making at SpiceJet Ltd, the country's second largest low-fare carrier.

Apart from orders for 30 Boeing 737-800 planes worth $2.7 billion, SpiceJet is planning to lease up to a dozen more aircraft to enhance its network. A series of senior appointments have also been made, while a new chief executive officer (CEO) is set to take over soon.

In mid-June, Maran bought a 37% stake in SpiceJet and is in the process of making an open offer to pick up an additional 20%. The 30-plane order was decided in less than a month and a half of Maran taking over.

"We are looking to acquire 10 to 12 Boeing 737-800 planes on lease," said Kishore Gupta, director, SpiceJet. "These planes will join SpiceJet's fleet by 2012-13. As part of the earlier orders, SpiceJet will take delivery of six such planes in this financial year."

SpiceJet, which has a market share of 13%, has 22 Boeing 737 planes and flies to 20 Indian cities. It will start international services on 7 October with a flight from Delhi to the Nepalese capital Kathmandu, followed by a service linking Chennai and Colombo.

The leasing plan reflects a further strengthening of the local market.

"SpiceJet has taken a calculated decision to acquire more planes as demand is outstripping supply," said Gupta, who's officiating as CEO. "In the international front, we would only look at the Saarc (South Asian Association for Regional Cooperation) sector for now." Saarc is a grouping that includes Bangladesh, Bhutan, the Maldives, Nepal, Pakistan and Sri Lanka, apart from India.

SpiceJet aims to take its fleet size to 75 planes by 2018, brokerage Anand Rathi Financial Services Ltd said in a 19 August report.

"The new and strong management with a healthy cash reserve of $125 million ('583.75 crore) and sound business model should help the company to outperform the sector and its peers," according to the report. "After the balance sheet restructuring, the new promoter's entry has bought the net worth close to positive and reduced the debt levels close to zero."

Apart from faster decisions, "employee morale is high," Gupta said. "This is primarily because employees have a psychological boost with a strong promoter."

A new CEO will take over the airline shortly and the company is expecting clearance from the Securities and Exchange Board of India for the open-offer process.

Another SpiceJet senior executive said on condition of anonymity that the post will be filled by Neil Mills, chief financial officer of Dubai-based low-fare carrier flydubai. Mint was unable to independently verify this.

Sanjay Aggarwal had resigned as CEO on 2 July, 20 months after moving from the US to turn the airline around. His resignation came after Maran bought a controlling interest on 12 June from SpiceJet promoter Bhupendra Kansagra and buyout specialist Wilbur L. Ross.

This executive added that SpiceJet has also made key leadership appointments for airport services, customer relations and human resources.