SpiceJet in talks with Gulf airline for investment

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SpiceJet has held 'preliminary discussions' with a Gulf airline for potential investment in the Indian budget carrier, a news report has said.

"There have been preliminary discussions to check in principle whether there is interest on both sides and the confirmation there would be 'yes there is'," SpiceJet CEO Neil Mills told Arabian Business.

Any such tie-up depends on a policy shift in India's aviation industry, which currently prohibits foreign direct investment (FDI) in the sector.

Mills said as the framework for FDI in Indian aviation is not yet in place, overseas carriers were reluctant to enter more formal negotiations.

"(Talks have) been on a preliminary basis, because they've quite rightly said what's the point in investing money in due diligence if the rule to enable (an investment) doesn't even exist," Mills was quoted as saying.

Mills, however, declined to reveal whether UAE-based Etihad Airways, which owns minority stakes in Air Berlin and Virgin Australia, and Qatar Airways were among the interested parties.

SpiceJet has a network of 41 destinations across South Asia and the Middle East.

Any future tie-up, Mills said, would provide reciprocal benefits.

"We've got a good network and we're carrying 36,000 people a day (and) about one million people a month now, so we've got good feed and good catchment," he said.

A partnership with an international carrier would give SpiceJet access to economies of scale on procurement contracts and long-haul options for its passengers, he added.

On the possibility of any change in India's aviation policy, Mills said a part of the issue is that the majority of carriers have realised "they can not use (FDI) anyway".

"Either their debt burden is so large that nobody would want to take a stake in them because you inherit a stake of the debt, and other carriers are already owned up to 49 per cent on an offshore basis anyway," he said.

SpiceJet will begin a daily service to Riyadh from its hub in Delhi by October, he said, adding that the airline is currently not assessing any other Gulf routes.