A short while after placing an order for over 205 Boeing aircraft, Ajay Singh, promoter SpiceJet, and Dinesh Keskar, Senior Vice-President, Sales, Asia Pacific and India, Boeing, met the media to clarify the details of the contract.
Edited excerpts
With the Boeing 777 and Airbus 350 and those kind of aircraft it is very difficult to take aircraft from one airline and move them to another airline. It is too expensive. That is why I do not see any issue in financing this deal.
What about the pre-delivery payment? Generally it is 1-10 per cent, which will be anything from Rs 1,500 crore to Rs 15,000 crore, in this case. How will you raise that kind of funds?
Ajay Singh: You will find out over a period of time. We are well equipped to pay whatever we need to pay by way of our commitment in this contract. Obviously, we have booked an order… whatever we have paid we have paid from our internal resources.
I want to reiterate there will be no dilution of equity, there will be no raising of significant debt for the purpose of this particular order, at least for the next few years. We are in a very comfortable position. We see absolutely no challenge in terms of financing the aircraft. The task before us is to ensure that financing happens in the most cost-efficient manner possible.
How much of the financing has been tied up for the aircraft that have been ordered?
Ajay Singh: We have just started the process. We have several options for financing. We are evaluating those offers. The first deliveries are 18 months from now. We will find the best. Obviously, some advances have been paid by the company. Whatever is required under contract will be paid.
What is the net worth of the company?
Ajay Singh: The net worth has been negative. It has become far less negative than it was in the last two years. I think it is about negative by Rs 400 crore or so.
What is the idea of low-cost long-haul flights?
Ajay Singh: It is still in its infancy. We are focusing on the narrow-body. The narrow-body order -- the MAX aircraft in itself gives us a bigger range -- up to one more hour of flying. The four-hour flights can now be done for up to five hours. That opens up several new destinations for us to explore.
In terms of wide-body there are models around the world where people have attempted low-cost long-haul and some are doing well. We believe that with a market as large as India where there is a large population and an increase in disposable incomes that is forecast for the coming years, the GDP is bound to grow so we feel that there is little reason why people will not want to travel to different parts of the world, provided those flights come at an affordable cost. If we can stimulate that market with lower fares, and that stimulation is only possible if you bring down costs on a unit basis. If we find there is a model that works for SpiceJet, we will certainly explore it.
By when can we expect an outcome on the LCC long-haul?
Ajay Singh: We are doing it. I do not want to put a time line.
What did Boeing do to support you?
Ajay Singh: In 2014, one of our largest partners was Boeing. Boeing took a lot of trouble to advise us on what we could do to keep the airline flying. They refunded some of the advances that we had paid for aircraft for a period of time. They helped us procure aircraft as we sought to grow. Boeing played the most important role in trying to assure lessors that SpiceJet would remain flying.
Are the legacy issues behind you?
Ajay Singh: I think we have pretty much cleaned up all the legacy issues. We inherited a lot of legacy stuff. Today we have zero bank debt, we have no dues to the Government, we have no dues to the leasing community…. We have pretty much paid off all our creditors. We have paid all taxes, all private airports, all Airports Authority and all banks. We have completely cleaned the slate as far as SpiceJet is concerned. We have zero debt other than the debt which is a consequence of putting the Bombardier on our books.