David Fickling is a Bloomberg Gadfly columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

Gulf carriers have a challenge: How to get their hands on Indian air passengers without risking money on Indian airlines. 

Saddled with vicious competition that's seen fares drop as low as 2 cents per flight, according to Bloomberg's Anurag Kotoky, a web of state-based jet fuel taxes that can add more than 40 percent to the cost of kerosene, and chronic congestion in major cities, India's aviation industry is notoriously unprofitable. 

At the same time, the nation's 28-million-strong diaspora is an attractive prize for any airline with ambitions to connect the world. That's particularly the case for the Middle East: The six members of the Gulf Cooperation Council account for about 64 percent of the world's 11 million non-resident Indians, the overseas citizens who are most likely to make journeys back to the mother country.

The Home and the World
Non-resident Indian population, by country
Source: Ministry of Overseas Indian Affairs
Note: Non-resident Indians are citizens of India living overseas

The three state-owned carriers vying for dominance in the Gulf have taken different approaches to solving this conundrum.

Etihad Airways, whose promiscuous network of alliances includes equity stakes in Alitalia, Air Berlin and Virgin Australia, has moved closest to the subcontinent with a 24 percent equity stake in the country's second-biggest privately owned airline, Jet Airways. 

Emirates, the biggest carrier by international passengers, has taken the opposite tack. The carrier has nine routes from Dubai to Indian cities and another eight to Pakistan, Bangladesh and Sri Lanka, but since selling its 44 percent stake in Sri Lanka's national carrier in 2010 it's forsworn shares in rival airlines. 

That leaves Qatar Airways, whose Chief Executive Officer Akbar Al Baker has bought 10 percent of British Airways's owner, International Consolidated Airlines Group, and mused in July about taking as much as 49 percent of IndiGo, India's dominant carrier. 

Elephant in the Room
Domestic market share of Indian airlines
Source: Directorate General of Civil Aviation
Note: "Other" includes AirAsia, 1.2%; Air Costa, 1%; Vistara, 0.2%

Al Baker's love is unrequited. While IndiGo has the rare virtue, for an Indian airline, of making a profit, it's disavowed any interest in a tie-up. News reports quoting the Qatar CEO's stated interest were ``completely baseless," LiveMint quoted the Indian airline as saying in July:  ``There is no discussion, leave alone negotiation, about any potential equity or other financial investment by Qatar Airways in IndiGo."

That doesn't leave many options. Jet Airways has already taken Etihad as a dance partner. Air India is government-owned -- which makes a deal unlikely -- and massively loss-making, which makes it unappealing, too. Go Air, owned by textiles-to-biscuits conglomerate Wadia Group, is probably too small to match Qatar's ambitions, and doesn't particularly need outside investment. 

The one remaining option is SpiceJet, which has a 9.4 percent market share and has surged more than 260 percent since Jan. 16, when the return of co-founder Ajay Singh as chairman with 15 billion rupees ($243 million) of fresh investment sparked hopes of a Steve Jobs-like revival. The carrier has indeed received interest from Gulf airlines, Singh said in Dubai on Sunday.

Good Money After Bad
SpiceJet net profits and losses, billion rupees
Source: Bloomberg data

There's just one catch: even by the dismal standards of airlines, SpiceJet's aggregate 28 billion rupees ($425 million) of net losses since 2001 represents a dreadful outcome. It's posted 1.1 billion rupees of Ebitda since Singh's return, but would still take more than six years' worth of earnings at those rates to pay off its 14 billion rupees of net debt. With liabilities running 11 billion rupees ahead of its assets,  there would be nothing for a shareholder should all that debt prove unmanageable.

Investors should temper their expectations. Imagine Singh is able to repeat the positive Ebitda posted in the past two quarters through the rest of the year, and he's still only looking at about 2.2 billion rupees of annual earnings. SpiceJet's enterprise value is currently 25 times that amount, compared with a median multiple of 6.2 among global airlines with more than $1 billion in annual sales, according to data compiled by Bloomberg. Until the company starts showing more of a track record of recovery, it's doubtful that even Al Baker is that desperate to dance.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
David Fickling in Sydney at

To contact the editor responsible for this story:
Paul Sillitoe at