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Reliance ADAG in talks to acquire Spicejet

A local media report said that Reliance ADAG was keen on acquiring stake in the airline, in which Tata Group has minority interest.

The third largest listed private airline operator by sales had underperformed the market over the past one-month till 5 June 2008, declining 24.97% compared to the Sensex’s decline of 9.05%. It had also underperformed the market in the past one quarter, declining 42.49% compared to Sensex’s decline of 1.29%.

The company’s current equity is Rs 240.65 crore. Face value per share is Rs 10.

Vijay Mallya-promoted Kingfisher Airlines and the countrys largest private sector carrier Jet Airways are also said to be in fray for picking up a stake in SpiceJet. SpiceJet, which just completed three years of operations, is valued at around Rs 755 crore, according to its market capitalisation. Anil Ambani had also evinced interest last year to buy a controlling stake in Deccan Aviation.

Rising aviation turbine fuel (ATF) prices will hit airlines. Airlines re suffering huge losses and they cannot pass the entire burden (of jet fuel price rise) on users as it negatively affected the number of passengers carried by them.

Most airlines had raised fuel surcharge recently due to rise in jet fuel prices. Jet Airways, Kingfisher and budget airline Deccan Aviation have raised fuel surcharge with effect from midnight of 2 June 2008. All the three airlines increased fuel surcharge by Rs 300 for sectors under 750 kilo meter and by Rs 550 for sectors over 750 kilometers, reports suggest.

Jet fuel accounts for 40% of the operating cost of Indian carriers. State-run Indian Oil Corporation has raised jet fuel prices by 18.6% effective from 1 June 2008. Domestic prices, offered by the firm, have gone up about 89% from June 2007.

SpiceJet had said earlier it will consider temporarily suspending flights on financially unviable routes as losses mount on account of surging jet-fuel prices.

SpiceJet is a low-cost airline based in New Delhi, India. It began services in May 2005.

SpiceJet is yet to report profits ever since its commenced operations. The company's net loss widened to Rs 70.74 crore in year ended March 2007 (FY 2007) as compared to net loss of Rs 59.13 crore in year ended May 2006 (FY 2006). Net sales rose 52.60% to Rs 640.44 crore in FY 2007 over FY 2006.

Source: NDTV Profit

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