Kalanithi Maran-promoted SpiceJet may have accumulated losses of over Rs 3,000 crore till date, but contrary to the popular perception, the sudden downward spiral of the airline did not begin with aviation regulator Directorate-General of Civil Aviation (DGCA) deciding to cap forward bookings to 30 days at the start of December.
Sources close to the development told FE that the question of survival actually first came up in October when the airline faced a “cash crunch” after clearing liabilities of about Rs 400 crore towards income tax and service taxes. The move suddenly left the bank accounts empty and left the airline to survive from daily earnings from forward bookings — about Rs 13-14 crore a day at the time.
“The legacy losses did the airline in. After paying the tax dues with penalties in August-October period this year, the airline faced a major cash crunch. It did not want to reduce fleet by returning aircraft because that would mean lesser seats to sell and lower revenue, but there was no choice,” the source said. “There was a point in November when the airline even thought of shutting down operations,” a second source added.
SpiceJet has returned 15 of its older Boeing 737 aircraft since July to cut maintenance costs. The current fleet stands at 20 B737 and 15 Bombardier Q400s operating a 230 daily flight schedule. The airline has since cleared income tax dues for 2013-14 and service tax dues till November 2014, but has about Rs 1,200-crore total liabilities across lessors, banks, airports and other vendors. The DGCA decision to cap bookings was actually the second blow. When on December 5, the regulator issued the order, daily revenues from forward bookings fell 90% within a week to a few lakh of rupees, said one of the sources. Contrast this to a far higher daily cost of operations of about Rs 8-9 crore.
30/12/14 Roudra Bhattacharya/Financial Express
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Sources close to the development told FE that the question of survival actually first came up in October when the airline faced a “cash crunch” after clearing liabilities of about Rs 400 crore towards income tax and service taxes. The move suddenly left the bank accounts empty and left the airline to survive from daily earnings from forward bookings — about Rs 13-14 crore a day at the time.
“The legacy losses did the airline in. After paying the tax dues with penalties in August-October period this year, the airline faced a major cash crunch. It did not want to reduce fleet by returning aircraft because that would mean lesser seats to sell and lower revenue, but there was no choice,” the source said. “There was a point in November when the airline even thought of shutting down operations,” a second source added.
SpiceJet has returned 15 of its older Boeing 737 aircraft since July to cut maintenance costs. The current fleet stands at 20 B737 and 15 Bombardier Q400s operating a 230 daily flight schedule. The airline has since cleared income tax dues for 2013-14 and service tax dues till November 2014, but has about Rs 1,200-crore total liabilities across lessors, banks, airports and other vendors. The DGCA decision to cap bookings was actually the second blow. When on December 5, the regulator issued the order, daily revenues from forward bookings fell 90% within a week to a few lakh of rupees, said one of the sources. Contrast this to a far higher daily cost of operations of about Rs 8-9 crore.
30/12/14 Roudra Bhattacharya/Financial Express
