Ajay Singh, who helped found SpiceJet in 2005 and was likely to submit his rescue plan by the end of the month, has agreed to take control of the ownership and management from majority owner Kalanithi Maran's Sun Group, the airline said on Thursday.
SpiceJet has been struggling to pay its bills for months because of a cash crunch and looked on course to become the second Indian carrier to collapse in as many years after it was forced to ground its fleet briefly last month.
Together with at least one financial investor, Mr Singh will invest Rs 1,500 crore ($241 million) in the airline, a Civil Aviation Ministry official said, declining to be named. The ministry will approve the bailout in the coming days, he said.
The deal involves a fresh equity injection that will dilute existing shareholders, Mr Singh told Reuters. He declined to comment on the financial details of the deal.
"Oil prices are low, we have a pro-growth government in India. If you can deal with the past liabilities of SpiceJet and get the costs low, I think it's a great time to be in aviation," he said.
"Breaking even in the next financial year is what we should be aiming for."
Analysts say Mr Singh will need cash to pay SpiceJet's immediate bills, and then to help cut costs that have left the carrier unprofitable since 2013.
"Survival for SpiceJet requires a lot of things to materialise," said Harsh Vardhan of Starair Consulting. "It needs a large chunk of cash flow, it needs operations streamlined. And a lot of it will depend on the competition."
Sun Group Chief Financial Officer SL Narayanan told a television network that Sun Group, which bought into SpiceJet in 2010, would remain a minority shareholder.
Mr Maran and his KAL Airways Private Ltd own nearly 59 per cent of SpiceJet, assuming the full conversion of warrants and securities, according to Bombay Stock Exchange data. The stake is worth about $102 million or over Rs 630 crore at the current market price.
In India, one of the fastest growing air travel markets in the world, fierce and growing competition has pushed fares to among the lowest in the world. Together with high operating costs, this has left the majority of carriers losing cash.
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