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SpiceJet says it is in advanced talks to get funding

Wednesday, 21 May 2014 - 6:50am IST | Place: Mumbai | Agency: dna

After reporting its biggest ever quarterly loss last week, low-cost carrier SpiceJet on Tuesday said it is in negotiations with an external entity for capital infusion.

"We are in very advanced stages of a capital infusion discussion with an external entity that when completed will help us clean up our arrears and rebuild with confidence," a company spokesperson said.

The airline did not provide any details on the timeline and the investment partner as talks are on. The airline last week announced its biggest quarterly loss of Rs 321 crore for the fourth quarter ended March, which widened from Rs 186 crore in the corresponding period last year due to expensive jet fuel, falling rupee and slow passenger growth.

This is the third straight quarterly loss for the airline, taking the total to Rs 1003 crore in 2013-14.

The LCC's auditor, S R Batliboi and Associates, had said the loss along with SpiceJet's total liabilities exceeding its assets by Rs 1,019.5 crore on March 31, 2014, "indicate the existence of a material uncertainty regarding the company's ability to continue as a going concern".

With mounting losses, the airline is currently looking at trimming its costs to improve profitability. According to industry sources, SpiceJet is undertaking network rationalisation, efficiency improvement, cost reduction and better customer engagement.

According to experts, the airline could be in talks with private investors for additional capital infusion. SpiceJet reportedly has been in talks with different foreign carriers for an equity participation. The government in 2012 allowed foreign carriers to invest maximum 49% into Indian airlines.

The airline last year announced a three-year interline agreement with Singapore-based Tigerair to enhance connectivity between flights operated by both carriers. An equity infusion from Singapore-based carrier could be on cards, according to experts.

"The Indian aviation market has a strong outlook in the long run. The short-term problems related to excessive taxation, over-regulation and bureaucratic delays are likely to be addressed soon, given the huge mandate received by the new government. It's good time to invest in Indian carriers," said Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG.

Meanwhile, the airline on Tuesday announced the promotion of Kamal Hingorani, currently SVP and head of ground and airport services to the expanded role and position of SVP and head of customer experience. Ashwin Noronha, who joins the airline from the consulting and auditing firm KPMG, would head ground and airport services.

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