SpiceJet open to sell more stakes in airline biz

Indian airports' revenues

In NEW DELHI: According to chairman and managing director Ajay Singh, low-cost airline SpiceJet is willing to sell further shares in order to lower its liabilities.

“We can change. We will consult with our partners to determine their preferences. Nevertheless, we must deleverage our balance sheet in order to have room to expand, and that is what we are attempting to do, according to Singh, who was responding to a question at the CAPA India Aviation Conference.

The Gurugram-based airline had liabilities of almost 14,000 crore at the end of the December quarter, when it reported a four-fold increase in net profit to 106.8 crore thanks to strong demand and increased fares.

The carrier has discussed contract renegotiations, capital raising, and restructuring with lessors, investors, and lenders in India and overseas. Carlyle Aviation, the airline’s main lessor from which it has leased 13 aircraft, has agreed to convert $100 million in unpaid debt into a 7.5% ownership stake and $65.5 million in compulsorily convertible debentures in the cargo segment in exchange for the conversion of the debt.

“SpiceXpress, the cargo entity, will begin functioning as a separate entity on April 1. There are several individuals who SpiceJet owed money to. Because airlines naturally possessed these assets during COVID, for which they had to make lease payments but did not receive payment. As a result, the liability increased. In order to help us pay those off, we converted some of our creditors’ debt into stock in this cargo unit “Said Singh.

The grounding of the Boeing Max fleet in March 2019 following two deadly incidents involving the aircraft type, in Singh’s opinion, was a worse catastrophe and put SpiceJet out of business in addition to the effects of COVID.

“This was a worse catastrophe for us than COVID, and as a result, we are currently working towards recovery. We were informed after the first plane went down that the pilot must have made a mistake, and while the incident was still being looked into, another plane went down. We were informed that it would last for 15 days at that moment. We will resume flying as of April 1 because it only requires a minor fix (2019). We had no idea it would take longer than two years “Said Singh.

In January 2017, the airline made a definite order for 155 Boeing 737 Max aircraft, with the option to purchase an additional 55. Only 12 of its 65-plane fleet are Max models at the moment because the airline is having trouble getting the money it needs to take delivery of new aircraft, according to two people with knowledge of the situation.

The addition of 35 aircraft from Jet Airways, which ended operations in April 2019, helped the airline expand its fleet in 2019. Notwithstanding the frequent technical difficulties of these aircraft, Singh believes that they were essential in giving SpiceJet access to desirable slots at all of India’s main airports.

“I would do the Jet Airways situation again in a heartbeat, “Said Singh.

He did acknowledge that the airline should have been better funded before 2020, though. With 119 aircraft in its fleet as of January 2020, SpiceJet had a 16.6% share of the domestic market. With a fleet of 65 jets, this decreased to 7.3% in January 2023; however, only 35 of its aircraft are now in service.

It is ingrained in SpiceJet’s DNA. We simply reject death. We were the weaker airline during COVID. IndiGo had backup plans. GoAir had the support of Britannia and Wadias, whereas Air India had the support of the Indian government. We opted not to shut down and pass away “Singh remarked, noting that throughout the pandemic, the airline aggressively promoted its freight business. The firm board had also requested approval from shareholders in February 2023 to raise new capital of up to 2,500 crore ($301.9 million) through an offering of securities to qualified institutional purchasers as part of its intention to raise money to finance development aspirations.

Over the next two quarters, the balance sheet will look very different. We want to make what is now happening operational. During the upcoming months, we will receive a sizable number of dedicated cargo planes, “added he.

“Demand tailwinds had a role in all of this. There is a huge demand. I believe there is more work to be done. Fares could yet be raised. There is no sign of a tapering. Maybe now is the time for these 1.3 billion people to wake up and say, “Let’s go!” “Added he.

Source: mint