Jet’s total liabilities are around Rs 25k cr, including dues to vendors; SpiceJet leasing 40 of Jet’s aircraft and hires 1,000 of its staff
Ajay Singh, chairman and managing director of SpiceJet, has said that the low-cost airline was too small to take over and turnaround Jet Airways, which needs a deep-pocketed strategic investor. In an interview with business news channel, CNBC TV18, Singh also said that SpiceJet has leased 28 aircraft, including Boning 737-800 NG and Bombardier Q400s, from Jet Airways’ grounded fleet so far and plans to add 15 more in the coming weeks. He said that SpiceJet has hired 1,000 employees, including pilots and cabin crew, from Jet which temporarily suspended all operations from April 17.
“We have signed LoI (letters of intent) for 28 Jet aircraft and we are starting to induct those aircraft tomorrow. We are in discussion to add 15 more Jet aircraft so it should be around 40 aircraft in all. These planes are going to need people to fly them and who better to fly them than people who are already trained to do it. We have recruited about 1,000 of Jet’s staff and as and when we require more people we will do it,” Singh told the business channel.
When asked by the channel if SpiceJet would be interested in bidding for Jet, Singh said, “SpiceJet is too small to turnaround operations like Jet Airways. Jet Airways needs someone with deep pockets to turn around … Would not want SpiceJet to have any financial engagement in Jet Airways bidding process.”
Singh said SpiceJet had evaluated Jet during the preliminary round of bidding but it did not move forward due to huge liabilities of the full-service carrier. He pegged Jet’s total liabilities at more than Rs 25,000 crore, which includes Rs 14,000 crore of dues to vendors. Jet’s gross debt at the end of December 2018 quarter stood Rs 7,654 crore.
“We were among the first to be approached to participate in the bidding process for Jet. The big deterrents are really the big liabilities that Jet has accrued over this time frame. In our opinion, those liabilities are close to Rs 25,000 crore or even higher. This is our estimate we have seen the number quite carefully. There were vendor liabilities close to Rs 14,000 crore and advance from sale of seats which will have to be paid back to customers as well,” Singh pointed out.
Jet’s lenders headed by State Bank of India are currently holding a bidding process to sell stake in the grounded carrier and have shortlisted four suitors — Jet’s equity partner Etihad Airways, India’s sovereign wealth fun NIIF, US-based TPG Capital and Indigo Partners.
On his plans to utilise Jet’s fleet, Singh said the airline will be offering business class seats to passengers on the newly-leased Boning 737-800 NG aircraft from May 7. The carrier will be inducting 22 such planes to be deployed on the domestic routes.
“There is potential in doing this because Jet was the largest provider of business class seats in the country. We believe it will be beneficial to do this but its an experiment and let’s see how it goes,” Singh explained to the channel. However, he did not disclose how these seats will be priced.
Currently, SpiceJet offers SpiceMax facility to its customers under which services like seat with extra legroom, complimentary meal and priority check-in are offered to passengers at a starting prices of Rs 799. Experts point out that selling business class seats is an unusual practice for a no-frills carrier.
“The announcement of operating business class seats by SpiceJet on the first batch of Jet planes is a first-of-its-kind step by an LCC, and will provide more options, particularly for business travellers. This reinduction of economy seat capacity will also be helpful in rationalising airfares on key routes bringing some relief to travellers in the peak vacation season,” Sharat Dhall, COO (B2C), Yatra.com said.
Singh also refuted rivals’ claim of unfair distribution of Jet’s slots to SpiceJet, saying the government is trying to protect connectivity to less popular sectors by allowing only new capacity to be deployed in prime slots vacated by Jet. “It makes very little sense for people to start pulling out aircraft, let’s say from the North-East or other such areas and use those aircraft on Delhi and Mumbai slots. What the government is saying that operate your network as you were doing and to take the space of Jet Airways network please get new capacity. I think that is only fair because doing anything else would mean you would deprive someone else (region) of flights,” he added. IndiGo has written a letter to the civil aviation ministry on April 24 alleging inequitable distribution of landing and take-off slots to a particular carrier.