If we are cutting losses, it means someone is reducing profits and will not be happy: SpiceJet

The Chief Operating Officer, SpiceJet, Sanjiv Kapoor is clearly bullish on the prospects of the airline. Days after the airline announced its Q2 result which saw it losses dip by 45 per cent to ₹310.4 crore from ₹559.5 crore during the same quarter of the previous year, Kapoor met the media to explain how the results were achieved. Excerpts:

Does everything depend on the recapitalization of the company?

Everything is not dependent on the completion of recapitalization but the completion of the turn around is, it is the last piece in the puzzle.

Can you expand on it please?

There are certain things that you need to renegotiate — contracts, etc — which needs capital. To get to the finish line, it will happen post recapitalization. But we are doing much….. we have done a lot already. The final piece of the puzzle is recapitalization which is required to bring down structural costs relating to engineering and contracts, among others.

Industry players complain that SpiceJet has spoiled the market with constant reduced price sales of tickets.

If there is constant profit pull in industry and we are reducing losses that means that some one else is reducing their profits. Obviously they will not be happy.

Is that the only reason other airlines are complaining?

Think about it. There is a fixed profit pool and we are reducing losses. One airline on a personal basis told me while they were very opposed to our discount purchase and other schemes and were forced to follow us, they are now starting to see it is very useful today because it improves your month entry loads and allows you to have less distress capacity to sell at the last minute. And it is actually helping them as well.

In the status quo, there may be one player making a lot of money. I do not know which one may be but the others are all losing money. If we maintain status quo all of us will lose money. If you want to do something to reduce losses or eventually make way back into profits then in a fixed pie it will mean that some one else will not be happy about it. Hopefully we can find a way the pie grows and every one is happy.

Given that the price of fuel is down and you financial position has improved does it make it easier to push off the decision on finding an investor for some more time?

We have been running on cash flows for a while. But in order to complete the turn around even though it helps that oil prices are coming down our legacy losses cannot be paid off using operating cash flows. You need fresh capital. I do not want to comment on whether the lowering of fuel price, etc, gives us more time to look for an investor.

Any more aircraft to retire?

We are trying to use the opportunity now while we are doing the fleet restructuring to exit those aircraft that we prefer not to have in our fleet and replace them with standard configuration aircraft that we want to have in the fleet.

We are taking some short-term pain to in order to clean up our fleet. We will be back to 31 aircraft by the end of the month and 35 by the end of December. 

- Source: http://www.thehindubusinessline.com