World News

India’s SpiceJet to take ‘substantial’ profit hit from 737 MAX grounding: Chairman

By Savio Shetty and Lisa Pauline Mattackal

(Reuters) – Indian airline SpiceJet Ltd <SPJT.NS> expects a “substantial” profit hit from the grounding of Boeing’s <BA.N> 737 MAX aircraft, co-founder and chairman Ajay Singh said on Thursday.

The budget carrier is in active talks with the planemaker on compensation for 737 MAX-related costs, Singh told the Reuters Global Markets Forum, adding he expected a payment from Boeing to compensate some of the lost profit and he wants to give the U.S. firm “every possible opportunity” to recover before turning to rival Airbus <AIR.PA>.

Below are excerpts from the interview, conducted on the sidelines of the World Economic Forum’s annual meeting in Davos, Switzerland:

Question (Q) – How is the conversation with Boeing progressing on compensation? How much of a hit in profit do you think SpiceJet will take due to the 737 MAX delay?

Answer (A) – We are talking actively and hope to have an offer from them soon. It (the profit hit) is substantial but will hopefully be covered by the compensation.

Q – What feedback are you getting from Boeing on when the 737 MAX might be ready to fly again? After that, how soon do you expect to get all regulatory approvals?

A – Boeing has told us that they expect the test flight in February and certification by March or April. We expect (India’s) Directorate General of Civil Aviation approval in April as well, and hope to be ready to fly in May or June.

Q – Do you see Airbus able to fill the gap created after the Boeing accidents? What sort of order are you looking at with Airbus, if it came to that?

A – We want to give every possible opportunity to Boeing to come through, given that they have been our long standing partners. But we continue to engage actively with Airbus.

(The order size) depends on the length of delay at Boeing and the offer from Airbus.

Q – How many planes have you had to take on a short-term lease because of the MAX grounding?

A – We were lucky that we got about 32 planes from Jet (Airways) <JET.NS> .

We have also taken 6 planes on a wet lease. Our capacity has grown by 50% this year despite the MAX grounding.

Q – Would you like the government to take any particular measures in the upcoming budget?

A – We hope that they can reduce excise duty on aviation turbine fuel back to 8%, with some movement on maintenance, repair, and overhaul.

((This interview was conducted in the Reuters Global MarketsForum, an Eikon-hosted chat room. Click here to join the GMF:

(Reporting by Savio Shetty and Aditi Shah in Mumbai, Lisa Mattackal in Bengaluru and Divya Chowdhury in Davos; editing by David Evans)