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SpiceJet to grow capacity by 40%, shares fall; Jetstar plots North Asian venture

Analysis

SpiceJet's shares slumped 7.4% yesterday - its biggest single-day decline since 09-Dec-2010 - as the airline outlined plans to boost capacity by approximately 40% this year after gaining fresh investment from billionaire Kalanithi Maran.

Summary
  • SpiceJet's shares experienced a significant decline of 7.4% after announcing plans to increase capacity by 40% and receiving investment from Kalanithi Maran.
  • SpiceJet aims to expand its fleet from 25 to 40 aircraft in 2011 and add new domestic and international routes.
  • Jetstar is in talks with Asian carriers to establish a joint venture, with negotiations progressing with Japan Airlines for a domestic joint venture in Japan.
  • Jetstar targets a traffic growth of at least 30% in Asia and Australasia this year, supported by a new marketing agreement with the oneworld alliance.
  • The decline in SpiceJet's shares is the largest single-day drop since 2010.
  • The daily share price movements of selected low-cost carriers on 27-Jan-2011 were highlighted.

The airline plans to increase its fleet from 25 to 40 aircraft in 2011 and add several domestic routes, as well as "one or two" international destinations.

Jetstar is in negotiations with several Asian carriers to establish a new joint venture in the region, according to a report in the Australian Financial Review today. CEO Bruce Buchanan stated discussions with Japan Airlines regarding a domestic joint venture in Japan were progressing. The carrier is targeting traffic growth of at least 30% in Asia and Australasia this year as it enters a new marketing agreement with the powerful oneworld alliance, according to a report in The Australian.

Selected LCCs' daily share price movements (% change): 27-Jan-2011

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