Thursday, July 01, 2021

Spicejet is making money off grounded Boeing 737 Max aeroplanes

Airlines follow a pretty simple formula for success -- fill as many seats and fly as many hours as possible, and keep a young fleet. One Indian budget carrier is going another way to drum up income -- not flying.

SpiceJet Ltd. hasn’t flown any of its Boeing Co. 737 Max jets for more than 27 months, after two deadly crashes operated by other airlines led to a global grounding. While most other major markets apart from China have cleared the Max to fly again, SpiceJet seems in no hurry to get it back in the air, and not just because there’s less demand to use the jet because of the pandemic.

India’s second-biggest budget carrier booked other income of 10.9 billion rupees ($150 million) in the seven quarters through December. That was the amount it expected to get in compensation from Boeing for not being able to fly its 13 Max aircraft, helping the company to trim its losses during deeply challenging times. Given the planes remain grounded, the figure is likely to rise when SpiceJet reports results for the year through March on Wednesday.

SpiceJet is the only Indian airline that operates the Max. With firm orders for 142 more, it’s also one of its biggest customers globally. Yet the carrier hasn’t asked regulators to lift the flying ban in India, a person familiar with the matter said. There’s no clarity on why it has held back, and it would take at least a month after applying to get approvals in place, the person said, asking not to be identified as the matter is confidential.

SpiceJet declined to comment. Boeing said it continues to work closely with aviation regulators in India and elsewhere about returning the Max to service, but doesn’t comment on talks with its customers.

In its previous quarterly results, SpiceJet said management was confident of collecting the compensation from Boeing. At the time, however, auditor Walker Chandiok & Co LLP said there was “no virtual certainty” the other income would be recognized, meaning there was no guarantee that the figure would materialize.

“SpiceJet is using this accounting method to shore up their results, and obviously to make sure that they don’t need to bring in solvency capital of a magnitude which would dilute the current ownership,” said Shailesh Haribhakti, a chartered accountant and chairman of Shailesh Haribhakti & Associates, adding that such an approach is allowed under Indian regulations.


To Read the News in full at Source, Click the Headline


Post a Comment