Government Comes to SpiceJet's Rescue, Airline Gets More Time to Pay Bills
New Delhi: Loss-making airline SpiceJet Ltd won a crucial reprieve from clamouring creditors on Tuesday, after the government asked airport operators and fuel suppliers to give the carrier more time to pay its bills.
In a crisis reminiscent of the high-profile downfall of Kingfisher Airlines - which left billions of rupees of debts and unpaid wages - SpiceJet has been battling refunds for customers, forced flight cancellations and a government-imposed ban on advance bookings for travel more than 30 days away.
Seeking to avoid another embarrassing airline collapse, the Civil Aviation Ministry said on Tuesday that the Directorate General of Civil Aviation or DGCA would be asked to allow SpiceJet to sell advance tickets until March 31, 2015.
Airport operators would be asked to give it 15 days to make payments, while state oil companies would be ask to give credit for up to 15 days, it said.
Banks or other financial institutions could be asked to lend up to Rs 600 crore ($94 million) - backed by the personal guarantee of SpiceJet chairman Kalanithi Maran, a billionaire media tycoon, it said.
A reclusive figure, company owner Mr Maran has been largely absent from talks between SpiceJet and the government and, since the start of its latest woes, has yet to make any statement on the airline's future - and on whether he could step in.
The ministry said SpiceJet would have to commit to raising capital itself as soon as possible. Tuesday's measures, it said, were aimed at avoiding a collapse that it said would be a "major setback" for the sector.
A spokesman for the airline was not immediately available to comment.
Despite a large and increasingly affluent and mobile population, airlines in the country have struggled to make a profit. Most make heavy losses as they struggle to raise fares above the operating costs in a highly competitive market.
SpiceJet, which has been in the red since last year, has already cut the size of its fleet by a third since September and cancelled more than 70 flights a day for the rest of this year.
"If new money doesn't come from the promoter (Mr Maran) then there is no case going forward," Kapil Kaul, CEO for South Asia at consultancy CAPA , said before the government measures were announced.
Mr Maran, who controls SpiceJet through his Sun Group, has put at least $400 million (Rs 2,541.2 crore at 1 dollar = 63.53 rupees) into the airline, Mr Kaul estimates, but would need to invest $300 million to $350 million (Rs 1,905.9 crore to Rs 2,223.55 crore) more to get it back on its feet.
Copyright @ Thomson Reuters 2014
