(Updates with closing share price in fifth paragraph.)
May 20 (Bloomberg) -- SpiceJet Ltd., the Indian budget airline that posted a record annual loss last week, said it’s in “very advanced” talks with an external investor for an infusion of capital. The shares rose to the highest in a month.
SpiceJet seeks outside investment to help it pay debt, the company said in an e-mail today, declining to name the potential investor. The company reported a full-year loss of 10 billion rupees ($170 million) on May 17.
The carrier, majority owned by billionaire Kalanithi Maran, said in March it saw little chance of luring investment soon amid high debt and intensifying competition, and that the debt has wiped out the company’s net worth. SpiceJet has fallen behind in dues to airports, has restructured aircraft deliveries and faces increased competition from AirAsia Bhd.’s new Indian low-cost venture.
“We will be going after cost optimization on a war footing now,” the company said in today’s e-mail. “We are reducing losses and slowly turning the ship around, but it will take some more time and patience before the job is complete.”
SpiceJet gained 3.3 percent to 17.10 rupees, the highest since April 15, at the close in Mumbai. The benchmark S&P BSE Sensex rose 0.1 percent.
The carrier plans to cut as much as 30 percent of jobs among ground staff to stay in business, the Mint newspaper reported earlier today. The report is a “figment of someone’s imagination,” SpiceJet said in the e-mail.
SpiceJet, based in Gurgaon, near New Delhi, is India’s fourth-largest domestic airline by market share. Privately owned IndiGo, also a budget carrier, is No. 1 while Jet Airways India Ltd. is the second largest.
AirAsia Bhd., the region’s biggest budget airline, received an operating license for its Indian venture on May 8, intensifying competition. Sepang, Malaysia-based AirAsia plans to give away some seats for free when it starts flying.
State taxes on jet fuel and high airport charges mean operating costs in India are among the highest in the region. Kingfisher Airlines Ltd., owned by liquor baron Vijay Mallya, ceased operations more than a year ago after amassing debt and defaulting on payments to airports, lenders and oil companies.
SpiceJet canceled 1 percent of its flights in April, the highest among local carriers, data from the civil aviation ministry showed today. In contrast, IndiGo canceled just 0.1 percent of its flights during the same period.
Slowing demand growth, a weak economy and a falling rupee hurt SpiceJet during the past nine months, while its network, product, pricing, on-time performance and services have improved recently, it said.
“Our restructuring plan in terms of overall revenue and cost strategy is only just starting to take effect, and will intensify in the coming days,” SpiceJet said.