Days after low-cost carrier SpiceJet raised Rs 3000 crore from institutional investors, the airline promptly cleared pending salary dues estimated to over Rs 80 crore. It is believed that the beleaguered low-cost airline will use much of the remaining funds to settle dues with a host of creditors from leasing companies to airports.
However, even if much of the funds the airline has raised will go towards clearing dues, the fact is that SpiceJet did successfully manage to raise this large sum of money. This is despite the airline having to face a litany of problems and constantly being dragged to the courts by everyone from the previous owners, the Maran family of the Sun Group to various leasing firms. In fact, just last week the Supreme Court upheld a Delhi High Court order mandating the return of three engines used by the airline on their Boeing 737 aircraft.
With leasing companies asking the airline to pay up, and taking their aircraft away, the airline is down to just having 21 operational aircraft according to website airfleets.net. This is a precipitous decline from the halcyon days of the airline before Covid when the airline had almost five times as many aircraft in its fleet and was the first Indian operator of the Boeing 737 MAX aircraft. However, the one-two punch of the coronavirus shutdown and the grounding of the Boeing 737MAX fleet worldwide following two deadly disasters almost knocked the airline out.
But this is not a time to dwell on the past, the fact is that despite difficult odds the airline has managed to raise a large sum of money from Qualified Institutional Placement (QIP) with institutions such as Morgan Stanley, Goldman Sachs, BNP Paribas, Nomura and Tata Mutual Fund subscribing to the issue. The quality of investment is a very positive indicator of the future prospects of the airline.
SpiceJet has a lot to do, first and foremost to regain the confidence of employees, service providers and most importantly customers. They can do this by becoming more reliable and offering more services. Due to issues with leasing companies, the airline has been forced to wet-lease temporary aircraft from airlines in Cambodia and Turkey. They should now concentrate on operating their own fleet and by repaying dues owed to leasing firms, rebuild their confidence in SpiceJet as a reliable airline. There is now talk of the airline growing to 100 aircraft by the end of 2026.
If this fructifies, it is a welcome move as the Indian aviation sector needs the competition as the domination of IndiGo and Air India/Air India Express leave customers with little choice. This duopoly needs to be challenged, and SpiceJet was a capable third player in the sector. Now, however, they will have to deal with increased competition from the likes of Akasa.
That said, the growth prospects for the Indian aviation sector are extremely high. Between January and June 2024, domestic air traffic numbered 79.35 million passengers, which was a growth at 4.28 percent from the same period last year. The growth could have been higher still had it not been for the collapse of Go First last year and persistent engine problems with Pratt&Whitney GTF engines plaguing IndiGo leading to almost a quarter of their fleet grounded. If SpiceJet can get their act together, and there is no reason to doubt that they can’t after the fund-raise, the Indian aviation sector could easily grow to 250 million passengers per year by 2028.
