Royal Airways presages profit in first year

SECOND PUBLIC ISSUE AFTER OPERATIONAL STABILITY

Royal Airways Ltd plans to raise funds to support the financing of the fleet and route expansion plans of its low cost service, Spicejet.

As a part of this move, the company, which is listed on the Bombay Stock Exchange, is looking at a second public offer.

"We will look at the capital markets for funds. But this will happen only after we become operationally stable," Mark Winders, chief executive officer, Royal Airways, said.

The company, according to Winders, expects to be profitable in the second half of the first year of operations and become cash-neutral in the second quarter of the first year itself.

The carrier recently given a preferential allotment of 1.53 million unsecured fully convertible debentures of Rs 100 each to IL&FS, which can be converted to 3.7 million shares of Rs 10 each.

"We have companies and investors behind us who have sound financial background. We can raise funds without any problem," Winders said.

It is interesting to note that the Indian low-cost carrier Air Deccan had recently raised substantial funds from a group of investors including ICICI Ventures. Royal Holdings Services Ltd, a Nevada-based investment company, has a major stake in Royal Airways Ltd.

Foreign institutional investors like Citigroup, ABN Amro and Goldman Sachs hold over 10 per cent equity in the airline company. Royal Airways was given a no-objection certificate by the government in November last year to start operations.

It is expected follow a dynamic pricing model for its flights. As per this model, airfare on a particular flight are determined on the basis of the demand and availability of seats.

It plans to start services in the busy and lucrative Delhi-Mumbai sector, Delhi-Bangalore, Delhi-Chennai and Delhi-Kolkata sectors. Besides, it will also operate services in the non metro sectors as well.

The low-cost carrier, which has placed an order for 10 airplanes, is expecting start operations by mid May. Besides, with full scale operations, it expects to carry about 2.2 million passengers a year.