SpiceJet Battles Court Order Over Engine Grounding, Highlights Public Disruption

SpiceJet, facing financial difficulties, has appealed to the division bench of the Delhi High Court to overturn a previous ruling that required them to ground three leased engines. This ruling was issued on August 16 after SpiceJet failed to pay the rental fees to French companies Team France 01 SAS and Sunbird France 02 SAS.

Legal Arguments

Amit Sibal, SpiceJet’s senior lawyer, highlighted the urgency of the situation, noting that grounding these engines would significantly disrupt public travel. “Our fleet consists of only 21 aircraft, and each plane requires two engines. Grounding these engines would result in two planes being out of service, causing major inconvenience,” Sibal explained.

Despite the request for immediate action, the division bench decided not to speed up the hearing and set the next date for August 20. The initial court order from August 14 also mandated that SpiceJet return the engines within 15 days and allow for their inspection. This came after the lessors refused an offer from SpiceJet’s chairman, Ajay Singh, to use his shares as collateral to cover the airline’s debts, citing concerns about the company’s financial health.

Financial and Legal Challenges

SpiceJet has been under growing legal scrutiny, with previous orders requiring personal guarantees from its directors due to its financial issues. To address these problems, SpiceJet plans to raise ₹3,000 crore through a qualified institutional placement by September 30. The airline has pledged to use ₹4.9 crore of this amount to settle outstanding debts by the end of September, but the lessors remain uninterested in further discussions.

According to court documents, Team France 01 SAS and Sunbird France 02 SAS took legal action against SpiceJet in December 2023 over unpaid dues of more than $20 million. SpiceJet has paid $8.36 million, but still owes $9.41 million as of August 12.

Financial Performance and Future Plans

SpiceJet’s financial struggles are further complicated by ongoing legal battles in the Delhi High Court and the National Company Law Tribunal, including contempt proceedings for failing to return assets to TWC Aviation Capital Ltd.

In the quarter ending June 30, SpiceJet reported a consolidated net profit of ₹158.2 crore, a 20% drop from the previous year’s ₹197.6 crore. Total income decreased by 8.3% to ₹2,077.8 crore, and expenses fell by over 7% to ₹1,919.6 crore.

As of June 30, SpiceJet’s total liabilities were around ₹11,252 crore, down from ₹11,690.7 crore as of March 31, and ₹12,420.2 crore at the end of December 2023.

Shareholder Strategy

Meanwhile, Ajay Singh is considering reducing his stake in the airline by more than 10% to raise approximately ₹3,000 crore. Despite this, he is expected to remain the largest shareholder, with his stake likely dropping to about 30-35% following the fundraising in September.