Wednesday, March 08, 2017

Kingfisher and SpiceJet: A study in contrast

Over the last two months, banks and other creditors of the now- defunct Kingfisher Airlines (KFA) got a breather when the Debts Recovery Tribunal in Bengaluru and the Karnataka High Court allowed them to start recovering their dues.

The airline’s founder Vijay Mallya, who resides in London, has not indicated whether he will challenge in a higher court the judgments, one of which calls for the winding up of United Breweries Holdings Ltd, Mallya’s listed investment company that has a $2 billion exposure to KFA.

In contrast, in January, low-cost carrier SpiceJet, which many predicted will go the Kingfisher way in 2014, placed an order for 100 new Boeing 737 MAX aircraft in a deal estimated at $11 billion (around Rs 73,600 crore). SpiceJet also secured the purchase rights of 50 additional Boeing aircraft, which includes the option to purchase Boeing’s wide-body planes such as the B777s or B787s that are priced at over $250 million each.
The massive order is an affirmation of the turnaround at SpiceJet, which was on the verge of closure in December 2014 when founder Ajay Singh returned to take over the reins from the Chennai-based Sun Group.
SpiceJet has now posted profits for eight quarters on the trot, beginning from the last quarter of FY15. For the quarter ended December 31, 2016, the airline posted a net profit of Rs 181.1 crore, a 24 percent year-on-year drop. (SpiceJet attributed the fall in profits to higher fuel prices and muted consumer spending on account of demonetisation.)
“They tightened their belt, reduced costs, did a great job in on-time performance, filled up their planes, and brought discipline back to the airline,” says Dinesh Keskar, senior vice president, Asia Pacific and India sales, Boeing Commercial Airplanes.
07/03/17 Anshul Dhamija/Forbes India