The ministry of civil aviation is likely to clear the revival and restructuring plan to restore normalcy of operations in budget carrier SpiceJet next week.
Sources close to the development informed original founder Ajay Singh have drawn up a five-year plan to revive SpiceJet. Singh, JPMorgan Chase and an undisclosed domestic investor are in the process of completing due diligence and have not found any financial irregularities in the airline so far.
“Once the approval comes in from the civil aviation ministry next week, the funds will be pumped in,” said a source close to the development. The capital infusion in the airline will be followed by a rejig in network strategy. The person added, “An evaluation is underway to see which routes are losing money. Some of these would have to be shut.”
On Thursday, SpiceJet’s board of directors approved a proposal of principal shareholder and promoter Kalanithi Maran and KAL Airways Private Limited to transfer the ownership, management and control of the company to former promoter and director Ajay Singh.
Currently, Kalanithi Maran and his company, KAL Airways, together have 58.46 per cent stake in the airline.
Singh along with two other investors will infuse Rs 1,500 crore in three equal tranches in the cash-strapped carrier till March, 2015. With the airline successfully managing to mobilise the promised funds the civil aviation ministry also lifted the restriction which had barred SpiceJet from accepting booking beyond March 31, 2015.
As per the revival plan firmed up by Ajay Singh, the airline would focus on strengthening finances and improving operational efficiency. This is likely to include phasing out of SpiceJet’s Bombardier Q400 fleet.
Singh has also said that if oil prices stay at current levels and economic growth picks pace, the airline should manage to turnaround operations in two to three quarters. Shares of SpiceJet touched the upper circuit today to close at Rs 20.50 a piece, up by 9.92 per cent on the BSE.