It’ll be tough to turn around SpiceJet without a radical reorganisation
“The financial markets have shown great sensitivity in valuing airlines on the basis of the direction of fuel prices. In the last week for example, a fuel price decline of around 10% has seen the share prices of some major US carriers increase by up to 40%,” informs Somaia. SpiceJet began operations in February 2005. Posting losses of up to Rs.7.5 million on a daily basis, it speculated to break even before 2009-10. Thanks to mounting fuel costs, its shares have lost almost two-thirds of their value in 2008. This bleak situation has resulted in reducing routes, rescheduling aircraft orientation and the need to raise an additional $100 million.
The WL Ross deal undoubtedly seems to be an opportunity to start afresh for SpiceJet. It will provide a platform for correcting past losses and restructuring operations to be more efficient and hopefully more adaptive to market demands and competition.
“The financial markets have shown great sensitivity in valuing airlines on the basis of the direction of fuel prices. In the last week for example, a fuel price decline of around 10% has seen the share prices of some major US carriers increase by up to 40%,” informs Somaia. SpiceJet began operations in February 2005. Posting losses of up to Rs.7.5 million on a daily basis, it speculated to break even before 2009-10. Thanks to mounting fuel costs, its shares have lost almost two-thirds of their value in 2008. This bleak situation has resulted in reducing routes, rescheduling aircraft orientation and the need to raise an additional $100 million.
The WL Ross deal undoubtedly seems to be an opportunity to start afresh for SpiceJet. It will provide a platform for correcting past losses and restructuring operations to be more efficient and hopefully more adaptive to market demands and competition.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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