Low-fare airline SpiceJet is open to selling more shares to reduce its liabilities, chairman and managing director Ajay Singh said.
“We are flexible. We will talk to our partners and see what it is they prefer to do. But, irrespective, we need to deleverage our balance sheet to have the space to grow, and that’s what we are trying to do,” Singh said in response to a query at the CAPA India Aviation Summit.
At the end of the December quarter, when it posted a four-fold jump in net profit to ₹106.8 crore thanks to robust demand and higher fares, the Gurugram-based airline had liabilities of around ₹14,000 crore.
The carrier has been in talks with lessors, investors and lenders in India and abroad for renegotiating contracts, raising funds, and restructuring. The airline has convinced Carlyle Aviation, its largest lessor from which it has leased 13 aircraft, to convert $100 million of outstanding dues into a 7.5% equity and $65.5 million worth of compulsorily convertible debentures in the cargo unit.
“The cargo entity (SpiceXpress) will start operating as a separate entity from 1 April. We have a bunch of people to whom SpiceJet owed money to. Because, of course, during covid, airlines had these assets for which they had to pay leases and were not paid. So, all this liability built up. So, we used this cargo unit to help us pay those by getting some creditors to convert into equity in the unit,” Singh said.
According to Singh, apart from the impact of covid, the grounding of the Boeing Max fleet in March 2019 after two fatal crashes involving the aircraft type was a bigger disaster and derailed SpiceJet.
“This was a bigger disaster than covid for us, and we are still on the path to recovery as a consequence of that. When the first aircraft crashed, we were told that, look, it must have been a pilot error, and while the matter was still being investigated, the second crash had happened. At that point, we were told that it was a 15-day affair. It is a small fix, and we will be flying again from 1 April (2019). We never imagined that that could take more than two years,” Singh said.
The airline had placed a firm order of 155 Boeing 737 Max aircraft in January 2017, with options to buy another 55. Currently, its total fleet of 65 planes has only 12 Max planes, as the airline faces difficulties in accessing funds to take delivery of new aircraft, two people aware of the development said.
In 2019, the airline’s fleet expansion was aided by the induction of 35 aircraft from Jet Airways, which ceased operations in April 2019. While these aircraft often suffered technical snags, Singh believes this was key to helping SpiceJet get access to good slots at all major airports of India.
“If I had to do the Jet Airways thing all over again, I would do it 100%,” Singh said.
However, he admitted that, in retrospect, the airline could have been better funded ahead of 2020. In January 2020, SpiceJet’s domestic market share was at 16.6%, with a fleet size of 119. This fell to 7.3% in January 2023 with a fleet size of 65 jets; however, only 35 of its planes are currently operational.
“It is in the DNA of SpiceJet. We just refuse to die. During covid, we were the weaker airline. IndiGo had its reserves. Air India had the government of India, GoAir had the backing of Britannia and Wadias. We chose not to shut down and die,” Singh said, adding that the airline aggressively pushed its cargo business during the pandemic. As part of its plan to raise funds to finance growth plans, the company board had also sought shareholders’ approval in February 2023 to raise fresh capital of up to ₹2,500 crore or $301.9 million through an issue of securities to qualified institutional buyers.
“You will see a vastly different balance sheet over the next two quarters. We want to operationalize what is on the ground. We will get a significant number of dedicated cargo aircraft over the next few months,” he said.
“All of this was helped by tailwinds of demand. Demand is tremendous. I think there is still some way to go. You could still increase fares. There is no tapering in sight. Perhaps it is time when these 1.3 billion people are waking up and saying, let’s travel,” he added.
