Tuesday, December 17, 2019

Five years to this day, SpiceJet nearly died. It now faces similar headwinds

Remember, December 17, 2014? Airports across India were filled with angry Spicejet passengers, waiting for their flights to depart. Television cameras streamed chaotic scenes from major airports.
In a dramatic turn of events, Ajay Singh, who re-started the airline in 2005 from its earlier avatar of ModiLuft and sold it to the Sun Group in 2010, was back at the helm of affairs. The airline had changed hands again and this time it was akin to Tony Fernandes buying Air Asia for RM 1 and liabilities.
But five years to this day, it is déjà vu all over for the airline. There are many reasons to be worried about SpiceJet, though mercifully there have been no defaults or lease terminations or notices. While the airline has recorded over 90 percent occupancy for the last five years, media reports say that the airline is left with less than Rs 100 crore in cash for operations. Compare that to SpiceJet’s arch rival IndiGo, the Indian market leader, has over Rs 10,000 crore in cash. SpiceJet returned to the skies. Contracts were renegotiated, payback timelines were extended, funds were pumped in. Most importantly, oil prices crashed – giving the airline some much-needed breather.
The dichotomy between high passenger loads and a potentially crippling cash crunch is not the only perplexing thing about SpiceJet. The airline was the biggest beneficiary of slots vacated by Jet Airways, after the suspension of that airline’s services in April 2019.
However, what could have well been a memorable December to remember could well become a forgettable December — similar to the one five years ago. Spicejet inducted the most number of aircraft in its fleet compared with other Indian airlines. This additional capacity was a precursor to get additional slots.

While the airline did benefit with the doubling of departures at Mumbai – India’s financial capital and its busiest airport —the airline posted huge losses in the second quarter of FY20, the first full quarter after the fall of Jet Airways.

SpiceJet reported an operating loss of Rs 282.3 crore and a net loss of Rs 462.6 crore. While Q2 has been a traditionally weak quarter, this year could have been different due to lack of capacity growth in the market and the additional impetus to Spicejet – thanks to a level playing field with IndiGo at both Mumbai and Delhi. The airline reduced its departures in the second quarter of FY20, primarily to get its former Jet Airways aircraft re-configured and re-painted.
17/12/19 Ameya Joshi/CNBC TV18
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