Spicejet takes off!

BSE-listed low-cost carrier Spicejet is up 6.3% at Rs. 21.95 per share, ruling close to day’s high of Rs. 22.15. Volumes on BSE (share not listed on NSE) in the first 2 hours of trade are over 40 lakh shares, against two week average quantity of 33 lakh shares.

News report re-surface that Doha-headquartered Qatar Airways is in preliminary talks with SpiceJet for a possible acquisition of 24% stake in the latter. Qatar Airways may infuse $200 million in debt and / or equity in SpiceJet. The two airlines have recently signed a non-disclosure agreement and a due diligence is to take place.

After Jet going to Etihad and Indigo not looking for a suitor, Spicejet remains the best available option, post Government of India allowing FDI in civil aviation sector to foreign airlines. With Jet-Etihad deal’s green signal and possible aviation ventures of Tata Group also cropping up, Indian aviation sector is facing renewed interest. Many foreign carriers, especially from Middle East and South East Asia, are eyeing for a pie in the Indian skies.

The deal, if materializes can be win-win. Spicejet auditors have raised red flags as the company’s accumulated losses have completed eroded its networth. Fund infusion will provide it the much necessary lifeline. Also, with seats from India to Abu Dhabi increasing from 13,000 a week to about 50,000, Qatar government, too, sought seat capacity between India and Doha be increased by 48,000 a week, so as to help Doha emerge as an alternative hub to Dubai and Abu Dhabi, and act as a feeder to Qatar Airways’ network.