Former owner considers SpiceJet rescue bid

Hopes for the survival of India's SpiceJet, the cash-strapped private carrier, soared on Friday amid reports that one of the airline's original founders is planning a rescue bid, backed by foreign banks.

Ajay Singh, a former director who founded the airline in 2005, sold most of his stake in SpiceJet in 2010 to Kalanithi Maran, the Chennai-based media magnate and current controlling shareholder, but still has a small stake.

In recent days Mr Singh - who has close ties with the ruling Bharatiya Janata party and was one of the masterminds behind Prime Minister Narendra Modi's election campaign - has been engaged in hectic talks with civil aviation officials over the contours of a rescue plan.

Shares in SpiceJet were up 19 per cent in early afternoon trading on Friday in response to Indian media reports of the planned bailout effort.

A person with direct knowledge of the proposal said Mr Singh had the support of leading international banks and was conducting due diligence on the carrier before making a final decision.

Ashok Gajapathi Raju, aviation minister, has said a deal could be announced early next week.

New Delhi is hoping SpiceJet can avoid the fate of liquor baron Vijay Mallya's Kingfisher Airlines, which collapsed in 2012 leaving banks, oil companies and airports saddled with more than $2bn of debts they are still struggling to recover.

"We want the airline to continue to fly," Mr Raju said after a meeting with Mr Singh on Thursday. The entrepreneur has made no public statements but earlier this week declared that the once-profitable low-cost carrier still had "a lot of potential".

However, a rescue faces potentially formidable obstacles. The potential investors want to complete due diligence on the carrier before putting any money on the table but it remains uncertain whether SpiceJet has enough liquidity to remain in the air until that is done.

SpiceJet has reported five consecutive quarters of losses. Aviation analysts say Mr Maran made poor decisions that backfired, including sacking veteran airline professionals he considered too expensive and adding Bombardiers for shorter routes rather than maintaining a fleet of a single type of aircraft.

The airline's problems came to a head this week when it was forced to suspend services for nearly 10 hours on Wednesday, after state-oil companies refused to sell it any more fuel on credit. Flights resumed on Wednesday evening and the carrier said it was operating normally by Thursday.

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Kapil Kaul, South Asia chief executive for the Centre for Asia Pacific Aviation, said that if SpiceJet were sufficiently recapitalised over the next 12 to 18 months it would have a fair prospect of a turnround, aided by sharply lower global oil prices. But he added it would also have to seriously cut other non-fuel costs.

Mr Singh "was instrumental" in making SpiceJet work until 2012, Mr Kaul said. "He understands the low-cost carrier business model, execution issues and regulatory/policy environment. There is a turnaround possible. But it will be a high-risk, high-reward game."

Meanwhile, Vistara, the airline jointly owned by Singapore Airlines and the Tata group, announced that it would start flying on January 9, initially operating just between Delhi and Mumbai, and Ahmedabad.

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