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SpiceJet in the news again

SpiceJet is back in the news, for three reasons – one, for its offer for disposing its minority stake; two, for not being a party of the lobby opposing new FDI policy in aviation sector; and three for the decline in its profits.

The Sun group, owned airline is in talks with a Oman based sovereign wealth fund, and a few others for divesting its minority stake to raise funds to pay for its expansion schemes.

While the low cost carriers IndiGo and GoAir had planned to jointly oppose the new FDI policy on aviation, which seeks to allow foreign airlines to invest in start-ups, Spice Jet remains silent on the issue.

A weak rupee and higher fuel costs made a dent on the airline’s first quarter results. A 10 per cent drop in net profits from Rs 56 crore to Rs 50 crore was seen despite revenue increase by 16 per cent. SpiceJet is also experiencing some turbulence despite its ambitious expansion plans. The airline has posed a 10 per cent decline in profit for the April-June quarter this year. This was more due to weak rupee and high cost of jet fuel than occupancy for the low cost budget airline which has emerged as the second largest air carrier in the country.

As is the case with any other airline, Spice Jet is taking the financial and operational turbulence and hopes to stabilise with a stake dilution.

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