NEW DELHI, Dec 9 — Indian billionaire Rakesh Jhunjhunwala’s stake in indebted airline SpiceJet Ltd has lost about 12 per cent of its value since his purchase of the shares 11 days ago stoked speculation of a turnaround for the carrier.

The company controlled by billionaire Kalanithi Maran has reduced its Boeing fleet, delayed wages, and faces more regulatory scrutiny after a spate of cancellations, including 81 flights yesterday. Its 13.4 per cent slide this month in the Bloomberg Intelligence Global Airlines Competitive Peers index compares with the 34 per cent rise in Jet Airways India Ltd.

SpiceJet’s majority owner Maran has a 53 per cent stake, while Jhunjhunwala’s Rare Enterprises bought 7.5 million shares at 17.88 rupees (RM1) each on Nov 28. Cutbacks at a carrier whose debt load is almost twice its market value may help newer competitors AirAsia India Pvt and Singapore Airlines Ltd’s local venture Vistara, according to CAPA Centre for Aviation.

“Promoter funding is inevitable and critical,” said CAPA’s South Asia Chief Executive Officer Kapil Kaul, referring to Maran. SpiceJet’s capital needs are now higher than January estimates of US$200 million (RM697m) for continuing operations and US$300 million for a revival, New Delhi-based Kaul said.

The company has reported five straight quarterly losses and tried for more than two years to woo an external investor to one of the world’s costliest aviation markets. The shares surged after the purchase by Rare Enterprises on speculation a capital infusion is closer, before erasing the gains.

Fewer jets

Jhunjhunwala didn’t pick up two calls to his mobile phone seeking comment. SpiceJet’s spokeswoman Sudipta Das said she wasn’t able to comment yet on the search for investment.

The carrier, India’s No 2 low-cost airline after IndiGo, is operating 22 Boeing 737 jets, down from 41 in 2013, as well as 15 Bombardier Q400s. It’s offered fares as low as US$8 to fill seats amid intensifying competition.

The Directorate General of Civil Aviation has barred SpiceJet from accepting bookings for travel in more than a month’s time, cancelled 183 of its landing and parking slots and told the company to pay delayed salaries by Dec 15, Bloomberg TV India reported Dec. 5.

SpiceJet has said restrictions on bookings is “counter productive,” adding it planned to discuss it with the regulator. The measure threatens to curb the company’s revenues.

Prabhat Kumar, the DGCA’s director-general, couldn’t be reached on his mobile phone.

Losses

Over the last seven years, Indian airlines lost US$22 every time a passenger stepped on board, CAPA estimates.

“Aviation is an unfortunate story of high cost of operations, high fuel cost and a price war,” said Chokkalingam G, managing director at Equinomics Research.

SpiceJet’s shares have struggled even after Brent crude tumbled to a five-year low from a June 19 peak, making jet fuel cheaper. The Bloomberg World Airlines Index is up about 24 per cent in that period.

“There is a fundamental issue with SpiceJet, they need a huge capital infusion,” said Arun Kejriwal, a director at Kejriwal Research and Investment Pvt. in Mumbai. “Just because oil prices have gone down doesn’t mean that an airline that is fighting for survival will start doing well.”

Investors should avoid the stock, he said. The shares rose 3.6 per cent as of 11.33am in Mumbai, rebounding from a 4.4 per cent drop yesterday that was the fifth straight decline.

Revival attempt

Maran has invested about 13 billion rupees in the airline so far, including the 7.4 billion rupees that he spent buying a stake from Wilbur Ross in 2010 at 47.25 rupees per share, according to SpiceJet. Maran has a direct stake in the company and an investment through his KAL Airways Pvt.

SpiceJet’s woes have revived memories of the demise of liquor baron Vijay Mallya’s Kingfisher Airlines Ltd, which stopped flying in 2012 after reducing its fleet and missing payments to workers, leasing companies, banks and airport operators.

SpiceJet will fly fewer and newer aircraft to return to profit, the company said in September. Losses narrowed 45 per cent to 3.1 billion rupees in July through September as revenue rose 15 per cent. Some 85 per cent of delayed November wages have been paid with the rest due this week, SpiceJet said Dec 5.

AirAsia India and Vistara, a joint venture between Singapore Airlines and Tata Sons Ltd, may benefit from the lucrative slots that SpiceJet is being forced to vacate, especially in Mumbai, CAPA’s Kaul said.

“It’s going to be difficult for SpiceJet to last out,” said Deepak Shenoy, founder of Capital Mind, a financial analytics firm based in Bengaluru, previously known as Bangalore. Steps such as the flight cancellations are “likely to scare away passengers from the airline, which will hurt it even more,” he said. — Bloomberg