SpiceJet’s Comeback Quest: Can Ajay Singh’s ₹3,000 Crore Push Revive the Struggling Airline?

New Delhi: SpiceJet Ltd, once a strong player in India’s skies, is now fighting a tough battle to regain its lost position. The airline, which almost shut down in 2014 due to financial troubles, is trying to get back on track with a planned ₹3,000 crore fund infusion. However, this might not be enough as the airline faces numerous challenges, including unpaid dues, legal battles, and fierce competition.

On Friday, the Delhi High Court criticised SpiceJet for using leased engines without paying the required fees. The court questioned how the airline could use someone else’s property without making the payments. This is just one of the many issues SpiceJet is dealing with as it tries to recover.

Challenges

Despite these challenges, SpiceJet remains hopeful about its future. The airline is planning to get shareholder approval by 13 September to raise ₹3,000 crore through a qualified institutional placement (QIP) of new shares. This process is expected to be completed by 30 September. According to a SpiceJet spokesperson, this new capital will be crucial for the airline’s growth and fleet expansion.

Market Share

SpiceJet’s market share in India has been shrinking this year, dropping to 3.1% in July from 5.6% in January, according to data from the Directorate General of Civil Aviation. The airline’s market share has been declining for several years, falling from 17.4% in 2014 to just 14.9% in 2020. Meanwhile, IndiGo, SpiceJet’s main competitor, has grown its market share from 31.8% in 2014 to 62% today.

Aviation expert Ameya Joshi explains that SpiceJet’s market share is linked to the number of aircraft it has in operation. Currently, the airline is flying fewer planes, which has led to a drop in its market share. In contrast, IndiGo has expanded significantly, while SpiceJet has reduced its operations.

SpiceJet’s struggles date back to 2014 when it was on the brink of closure due to heavy debt. The airline was rescued in 2015 when Ajay Singh, who co-founded SpiceJet in 2005, took control of the company. The Indian government also stepped in to help the airline stay afloat.

Growth Aimed in 2017

In 2017, SpiceJet aimed for growth by ordering 155 Boeing 737 MAX aircraft. However, only 13 of these planes were delivered before a global grounding of the Boeing 737 MAX in March 2019, following two fatal crashes. The grounding dealt a severe blow to SpiceJet, which was followed by the COVID-19 pandemic in 2020, causing further damage.

This year, SpiceJet has laid off around 1,500 employees, about 15% of its workforce, to save costs. The airline has also faced delays in salary payments and legal battles over unpaid dues to aircraft lessors, suppliers, and vendors.

Plans to Raise ₹3000 crore

Despite these difficulties, SpiceJet is trying to secure new funding to stay afloat. The airline plans to raise ₹3,000 crore through a qualified institutional placement of shares, and it has already raised ₹744 crore through a previous share issue. Additionally, SpiceJet has secured ₹316 crore in funding, bringing the total raised through its preferential issue to ₹1,060 crore.

SpiceJet’s spokesperson said the airline is also working on securing agreements for new engines for its grounded planes. Currently, only 23 of SpiceJet’s 56 aircraft are operational. The airline expects to expand its fleet over the next 45 days by adding new leased planes.

Net Profit

While SpiceJet reported a first-quarter net profit of ₹158.2 crore, this was down 20% from the previous year. However, it was an improvement from the March quarter’s ₹126.9 crore net profit and a significant recovery from the December quarter’s ₹299 crore net loss. The airline has also reduced its total liabilities to ₹11,252 crore as of June 30, down from ₹11,690.7 crore at the end of March.

Even with all these efforts, SpiceJet has a long way to go before it can regain the trust of passengers and stabilize its operations. In July, the airline carried only 13,000 passengers daily, compared to 60,000 daily passengers in July 2019. Its international operations have also shrunk, with just 4,000 passengers and 27 daily flights in July, down from 7,200 passengers and 50 daily flights in July 2019.

Jyoti Mayal, vice chairperson of the Federation of Association in Indian Tourism and Hospitality, noted that passengers often associate a higher market share with reliability and stability. Reduced operations might raise concerns about flight availability, punctuality, and overall service quality, pushing customers to choose more stable competitors.

SpiceJet has also struggled with punctuality, with only 51% of its flights taking off on time, the lowest among domestic airlines. Competing airlines like AIX Connect, Vistara, Air India, IndiGo, and Akasa Air have all registered better on-time performance.

Aviation consultant Ameya Joshi noted that irregular operations make it difficult for SpiceJet to charge higher prices for its flights. With multiple challenges to overcome, SpiceJet has limited time to turn things around.