U.S.-based private equity company WL Ross & Co. LLC will invest US$80 million in the Indian airline SpiceJet Ltd., one of the leading carriers in the country's competitive low-cost field, the U.S. company said Tuesday.
India's airline industry has grown dramatically in recent years as rising incomes and loosened regulations put air travel within the reach of millions of new customers. But rising fuel prices have caused most airlines to cut back on flights and increase ticket prices, slowing customer demand.
"We believe in the long term validity of the low cost airline model in India and that fuel prices eventually will stabilize," said Chairman and Chief Executive Wilbur L. Ross Jr. in a joint statement issued by SpiceJet and New York-based WL Ross & Co.
Ross and Ranjit Nabha, managing director and chief executive of WL Ross India, are expected to join the airline's board of directors, the statement said.
SpiceJet shares were trading at 28.55 rupees Tuesday, up 2.15 percent on the Bombay Stock Exchange. Meanwhile, the exchange's benchmark Sensex index dropped 4.91 percent to 12,676.19 points amid weak Asian markets.
SpiceJet is a low-cost airline based in New Delhi, India. It began service in May 2005. It was voted as the best low-cost airline in South Asia and Central Asia region by Skytrax in 2007.
SpiceJet was earlier known as Royal Airways, a reincarnation of ModiLuft. it was promoted by Ajay Singh, Sanjay Malhotra and the Kansagra family. SpiceJet marked its entry in service with Rs. 99 fares for the first 99 days, with 9000 seats available at this rate. This deal was followed it up with a Rs. 999 promotional scheme on select routes. Their marketing theme "offering low 'everyday spicy fares' and great guest services to price conscious travelers." Their aim is to compete with the Indian Railways passengers travelling in AC coaches.
On July 15, 2008 - Billionaire Wilbur Ross suggested he would invest $80 million (about Rs 345 crore) in the low cost airline. The board of directors of SpiceJet accepted an offer in-principle from the US-based PE firm that would make available about Rs 345 crore to SpiceJet, a joint statement issued by SpiceJet and WL Ross & Co.