the last three consecutive quarters, will fund its losses with a combination of expected operational cash flow and support from promoters, a senior company executive told FE.
SL Narayanan, group chief financial officer at Sun Group, the promoters of the company, on Monday told a business news channel that the airline has no plans to shut shop.
The auditors have rightly said that our net worth has now gone into the negative, but we will pull through and survive. We (the promoters) have invested Rs 1,400 crore into the company and will ensure it is held in safe custody," he said.
Narayanan added that the company is now working on getting a leaner structure and cutting routes that are less profitable.
The Chennai-based airline, which is the country's second-largest domestic carrier in terms of passengers, reported a loss of Rs124 crore for the quarter ended June 30, earnings for which were announced on August 14. The airline had reported a net profit of Rs 50.56 crore profit during the same period last year.
However, it has posted losses in every quarter since then, which led to a total loss of Rs 1,003.24 crore for FY14, a five-fold jump over the previous fiscal. The companys net debt stood at Rs 1,511.23 crore as on March 31, according to Bloomberg data.
The losses reported by the airline have led auditors to raise concerns. As on June 30, the company's total liabilities exceeded its total assets by Rs 1,145.6 crore, the airline's auditor, SR Batliboi and Associates, said. These conditions indicate the existence of a material uncertainty that may cast doubt about the company's ability to continue as a going concern, it added.
SpiceJets total liability stood Rs 3,954 crore as on March 31, according to a regulatory filing by the company.
Responding to the auditors' concerns, Narayanan said: "This has been happening for several quarters... Our net worth has gone into the negative and the auditors, quite rightfully, have drawn attention to it. That said, the way to look at this is: Does the company have the wherewithal to survive and meet its obligations And thats been proved beyond doubt on three different occasions in the recent past... the Marans have infused a total of Rs 550 crore into the airline (on these three occasions). We are not going away in a hurry, we would survive."
He added that the expenses during the most recent quarter are more in the nature of investments because the airline has cut routes that did not make financial sense. "We shortened destinations and stations where viability was in serious doubt, which necessitated that we give away four aircraft prematurely. As a result, we had to pay some early termination penalties. Redelivery of the aircraft -- which would normally have happened at the end of the lease period -- got accelerated and four planes had to be reconditioned and given back. All of this added to extraordinary one-time cost," Narayanan said.
On whether it would be easy to get a foreign investor, Narayanan blamed the regulations. "It is much easier for a foreign airline to come up with a greenfield project and not buy into an existing airline, which has all the legacy issues. In that sense, we feel a bit demotivated by the rule changes and my personal view is that the government ought to have allowed the existing players to become a bit stronger before foreign competition was allowed. Not only was that allowed, but six more licences were also issued. There is going to be bloodbath in the quarters ahead, which is why we want to become a leaner and more focused airline. We will not be able to spend the way we did earlier." As a result, he said, tier-II and III cities would be the casualties.
Other senior SpiceJet officials also said that a turnaround plan is under way for the airline.
Massive efforts are on, both on the cost and the revenue fronts, in addition to an all-new, rationalised network, said a SpiceJet official, on request