Headed for cash-and-carry unless it furnishes bank guarantees of around Rs 200 cr
Even as the top management of loss-making carrier SpiceJet spent all of Monday in a meeting trying to find a way to stay afloat, the airline could be in more trouble. Given how the carrier has been late on payments to suppliers, Airports Authority of India may put the Kalanithi Maran-led carrier on cash-and-carry mode later this week unless it furnishes bank guarantees of around R200 crore, sources said. That means SpiceJet will not receive any credit facilities and must clear all airport charges every time a flight takes off.
Last week, the Directorate General of Civil Aviation (DGCA) had asked the airline to stop taking bookings beyond a month due to its precarious financial position. The aviation regulator could also pull up the airline for continuing to issue tickets beyond 30 days, a top civil aviation ministry official said.
Official sources have said that SpiceJet owes suppliers, including AAI, R1,600 crore, though the airline in a statement issued on Sunday claimed that the figure was “significantly less”. Additionally, it is behind on salary payments largely for top employees who account for 15% of the total workforce. DGCA is understood to have withdrawn 186 slots from the airline while the airline has cancelled 70 flights per day from a peak of about 345.
SpiceJet posted a record loss of R1,003 crore in 2013-14 and has run up accumulated losses of R2,958 crore, apart from having a negative net worth of R1,459 crore. “SpiceJet officials had sought to defer airport charges by six to seven weeks but given the current position that may not be possible. Also, the airline is still accepting bookings beyond 30 days so they may get a show-cause notice,” the official said. The airline needs to beef up its equity capital and must submit to the DGCA a plan to pay suppliers.
In a statement issued last Friday on the bookings, the airline said, “SpiceJet believes this restriction will be counterproductive, and will be discussing the pros and cons of this cooperatively with the DGCA.”
Promoters Sun Group are unlikely to put in more capital — Maran and affiliated parties paid Rs 940 crore for a 37% stake in the airline in 2010, and have further put in about Rs 600 crore through several rounds of infusion, taking Maran’s stake to 53.48% today. Since early this year SpiceJet has been saying that a strategic overseas investment is imminent, but it has not been able to finalise an investor till date.
After falling almost 13% during intra-day trade, the SpiceJet scrip ended Monday 4.39% down at Rs 15.25 on the BSE. The accumulated losses and negative net worth of the airline, which started life back in 1993 as ModiLuft, has led its auditors, SR Batliboi & Associates, to highlight that there is “material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern”.
Incidentally, on several operational parameters including market share, passenger load factor and yields, the airline has been improving for the last three quarters since the January-March quarter this year. For this it has reduced fleet size from 37 to 22 Boeing 737s by returning old aircraft with higher maintenance cost to lessors. SpiceJet, which had a market share of 17.3% in October (down from a peak of 20.9% in July), saw its net loss drop 44.5% year-on-year to Rs 310.45 crore in the July-September quarter, while revenues went up 15% to Rs 1,450 crore.