Investment options of low cost airlines-the case of spicejet and ross funding

SpiceJet completed three successful years in the low cost airline industry in India. It has become airline of choice to most of the satisfied customers and frequent fliers. The efforts for continual improvement in reducing the cost in operations were fruitful and it continues to do so. The major current hurdle for the SpiceJet that it needs to manage, through the soaring oil prices, is the working capital resulting in financial crunch.

The cash strapped SpiceJet appointed Rothschild, a merchant banker, who consulted various measures for investment options and out of that W L Ross stepped forward with the positive decision. The investment was through the stake divestment and the likely seller were the UK based resident Kansagra family and Dubai based investment firm Istithmar. The deal is worth $ 80 million (Rs 340 crore) and is in the process of closing. It would be favorable for the SpiceJet to accept the deal with W L Ross comparable to other potential investors and their implications. This research case is descriptive of the challenge in hand and the possible solution subject to case constraints, as analyzed and concluded. The Indian economy is going through fast paced manifestations due to its liberalization, privatization and globalization zeal.