Aviation plans hit air pocket

Expansion plans of domestic airlines may hit an air pocket with the downturn in the capital market.

Analysts said airlines were expected to spend over Rs 100,000 crore on expansion. Of this, Jet Airways, with a fleet acquisition plan of Rs 12,000 crore, is expected to raise $800 million (Rs 3600 crore) through a combination of Foreign Currency Convertible Bond (FCCB) and a follow-up issue.

Though Air Deccan, which barely managed to scrape through in its recent public issue, and SpiceJet had not made public the additional amount they would raise from the market, industry sources said it would be substantial.

Air Deccan needs Rs 16,000 crore to finance its expansion, while SpiceJet is implementing a Rs 6,000-crore growth plan.

"Fund-raising programmes of all the companies appear difficult in the prevailing bear phase in the stock market. The airline companies will be no exception to this. They were heavily banking on mobilisation of funds through the market. Now, they will have to organise resources from alternative sources," they added.

Admitted a senior Jet executive, "We are waiting for a turnaround in the market. However, we are going ahead with the documentation process of the proposed FCCB," he said.

The market mayhem has taken its toll on airline stocks, among others. The Jet Airways stock today closed at Rs 630 "" 44.60 per cent lower than its close of Rs 911 on May 18. SpiceJet lost 88 per cent at close "" from Rs 68.30 on May 18 to Rs 36.20 today.

Deccan Aviation, the company that runs Air Deccan, today closed at Rs 85.40, registering a 13.61 per cent decline against yesterday's close of Rs 98.85. It was listed yesterday. The issue price was Rs 148.

However, Air Deccan sources sounded confident of finding avenues for funding its growth plan.

"The share price movements are no indication of the success of our business model. The company is continuing to make steady progress on all fronts and we are therefore well-positioned to establish leadership through our business model in the years to come," they added.

SpiceJet executives said the airline had no immediate plans to hit the capital market for aircraft acquisition. Earlier, SpiceJet had raised $80 million through FCCB.