A day after getting a breather in the form of an additional weeks time to clear airport charges, Spicejet has found itself in more trouble. Most flights for the low-cost carrier stood canceled or delayed till afternoon on Tuesday with the airline understood to have been denied fuel uplift across several major stations like Delhi, Mumbai and Hyderabad.
Airline officials, however, seem to have negotiated a deal with oil marketing companies (OMCs) under which operations have started to get back on track for the second half of the day with some morning flights being rescheduled for later. Without fuel, the airline’s plan to continue operations and improve its financials would have been seriously hampered.
“All flights have been tentatively rescheduled in the hope that the fuel situation will be restored. Nearly all morning flights stand delayed or canceled,” an airline official told FE in condition of anonymity.
Petroleum Minister Dharmendra Pradhan told FE, “We do not interfere in day to day working of the OMCs. Supplying to airlines is a commercial decision. In case government takes a holistic decision (for Spicejet), we would follow the same. Till now the petroleum ministry has not interfered.”
In a response to queries, a Spicejet spokesperson said, “There was a temporary operational issue. Flights have now resumed.”
Incidentally, oil marketing companies (OMCs) like HPCL and IOC had already put the Kalanithi Maran promoted low cost carrier on a cash and carry mode for several weeks because of the airline’s worsening financial condition. In contrast to a credit line on which airlines operate, cash and carry means that the airline has to pay for fuel every time a flight takes off.
“Spicejet is buying fuel from public sector OMCs on cash-and-carry model. Its ATF bill could range up to Rs 7-8 crore a day in Delhi airport in a day,” an oil ministry official said.
Spicejet has total liabilities of over Rs 2,000 crores to vendors, tax authorities and service providers, of which it needs to clear dues of Rs 1,400 crore immediately to continue operations, a top civil aviation ministry official said on Monday after day long meetings with the company management to find a lifeline.
On Monday morning, Spicejet management had also sent an email to all pilots asking them to be prepared for any eventuality in terms of survival for the airline. Later in the day, promoter Kalanithi Maran was understood to have given a personal guarantee to the government for payment of airport dues of about Rs 200 crore, leading the ministry to extend the payment deadline by a week.
SpiceJet, which posted a record loss of Rs 1,003 crore in 2013-14 and has run up accumulated losses of Rs 2,958 crore, currently apart has a negative net worth of Rs 1,459 crore.