In a sign of a possible turnaround of operations, low-cost carrier SpiceJet on Tuesday cleared salary dues for the month of November for all pilots and senior management officials. The airline, which was in the midst of a severe financial crunch for the first two weeks of December and had cancelled a bulk of flights for two straight days (December 16 and 17), had held back salaries of employees in the top 15% wage bracket till Monday.
The positive development, which hints towards an imminent investment from a clutch of investors led by previous promoter Ajay Singh, comes after the airline last week almost completely cleared dues of about Rs 14 crore with oil marketing companies (OMCs). However, the airline still has liabilities of about Rs 2,000 crore, including over Rs 200 crore due to Airports Authority of India (AAI), Rs 80 crore to other airports and about Rs 100 crore to tax authorities.
“We paid the salaries today. And there are no fuel overdues either,” a company official told FE, while requesting anonymity. A pilot also confirmed that the salary for November has been credited.
Most of the 230 flights for the airline also ran smoothly on Tuesday, with some cancellations taking place in New Delhi and other stations in north India because of the heavy fog.
On December 15, the civil aviation ministry extended an olive to SpiceJet by allowing it time and credit till December 31 to pay AAI dues. However, OMCs like Bharat Petroleum and IndianOil did not offer credit and instead put the Kalanithi Maran promoted airline on a cash and carry mode – this means the airline has to clear payments every time a flight takes off.
Co-founder Ajay Singh, who had started SpiceJet along with UK-based Bhupendra Kansagra in 2005 and sold it to Sun TV’s Kalanithi Maran in 2010, is said to be in advances talks with US-based private equity players to re-take charge of the airline. Singh and the new investors are likely to invest about Rs 1,500 crore, industry sources said.
Singh aims to get SpiceJet back to its lost glory by retaking all aircraft that had been returned to lessors by the current management in the past few months. The plan is to expand the network and frequency by taking the Boeing 737 fleet back to 35 from 22 today, as reported by FE in its edition dated December 22.
Incidentally, Prime Minister Narendra Modi is also believed to have discussed SpiceJet’s problems at a Cabinet meeting held last week. The government does not want the airline to go down and is willing to offer additional support given the airline is able to show seriousness in its revival efforts. The government has asked SpiceJet to show about Rs 200 crore in its bank accounts by December 31st.
Th airline, 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. The airline’s domestic passenger market share in November fell to 14.9% – the lowest point for the year so far.
The SpiceJet scrip at the BSE closed 9.46% down to Rs 16.75 on Tuesday.