SpiceJet, despite the financial struggles, is betting big on the domestic civil aviation sector and looks to ramp up its fleet by leasing 10 new aircraft, multiple sources aware of the low-cost carrier’s expansion plans told Moneycontrol.
The expansion plan comes amid domestic passenger traffic creating a new record this year and a buoyancy in the civil aviation sector.
A strategic ‘expansion’ plan
SpiceJet is looking to deploy its 10 new leased Boeing 737 aircraft on 60 popular and underserved destinations, according to sources.
“The expansion is strategically timed to capitalise on the upcoming peak travel season. The increased capacity will enable the airline to meet the surge in passenger demand during holidays and festive season,” an executive from SpiceJet told Moneycontrol.
The airline is holding investor roadshows in Mumbai, Singapore and Hong Kong to generate interest for its upcoming qualified institutional placements (QIPs) in a bid to raise around Rs 3,000 crore. It has appointed ICICI Securities, JM Financials and DAM Capitals as merchant bankers for a stake sale.
In March, the carrier had sealed the deal to augment capacity in preparation for the summer schedule, which runs between March 31 and October 26.
"The new planes are not part of the lease agreements signed in March. Those planes were signed on wet lease and some of them have been returned as well," the executive said.
Declining graph?
The airline has been operating 26 percent fewer weekly flights during its summer schedule, as compared to the corresponding period last year.
Data shows that it got permission to operate 1,657 weekly flights this summer, down from 2,132 last year. It has applied to operate 2,240 weekly flights during the winter schedule, which runs between October 27 and March 30. Last year, too, the airline operated 30 percent fewer flights than in 2022.
On September 2, many SpiceJet flights across Delhi, Mumbai, and Srinagar airports were delayed up to four hours as oil companies refused to provide aviation turbine fuel (ATF) to the airline over pending dues.
SpiceJet’s SG 8961 Srinagar-Delhi flight was delayed by more than 2.5 hours due to the issue. Originally scheduled to depart at 12.50 p.m., the aircraft took off at 2.35 p.m.
Last week, the crisis-hit budget carrier announced that it will put 150 cabin crew members on furlough for three months due to the lean travel season and the reduced fleet size of the airline.
A SpiceJet spokesperson said, “We deeply value the contributions of our crew members. During this furlough period, they will continue to retain their status as employees of SpiceJet, with all health benefits and earned leave intact.”
"As we work toward enhancing our fleet following the upcoming QIP, we look forward to welcoming our crew members back to active duty. We are committed to supporting our employees during this period," he added.
The Directorate General of Civil Aviation (DGCA), the regulatory body, has decided to place crisis-hit SpiceJet under enhanced surveillance that will entail increased spot checks and night surveillance to ensure safety of the airline's operations.
Based on reports of cancellation of flights and financial stress being experienced by SpiceJet, DGCA authorities said certain deficiencies came to light during a special audit of the airline's engineering facilities on August 7 and 8.
“In light of the past record and the special audit carried out in August, SpiceJet has once again been placed under enhanced surveillance with immediate effect. This would entail an increase in the number of spot checks/night surveillance with a view to ensure safety of operations,” the DGCA said in a release. The airline had faced a similar punitive measure last year as well.
Teething legal woes
SpiceJet is also dealing with multiple court cases regarding unpaid dues to former owner Kalanithi Maran, financial services firm Credit Suisse, aircraft and engine lessors.
Last month, the Delhi High Court ordered SpiceJet to ground three of its leased engines for failure to pay lease rentals to the lessors by September 3.
The order was issued following a petition filed by two French lessors — Team France 01 SAS and Sunbird France 02 SAS — claiming millions of dollars in overdue lease rentals from SpiceJet.
The court also rejected a plea by the airline for an urgent hearing in the case as the order to ground the engines would only disrupt its flights and inconvenience passengers, which would, in turn, lead to losses for the low-cost carrier.
On June 13, the National Company Law Tribunal (NCLT) had also issued a notice to SpiceJet in an insolvency plea filed by Engine Lease Finance BV for non-payment of over $12 million for the eight engines it had leased to the budget airline. SpiceJet raised objections on the maintainability of the plea.
Dwindling fortune
As of March 20, SpiceJet's operational fleet comprised 39 planes, while the total fleet size stood at 63. At its peak in 2019, SpiceJet had a fleet of 118 planes and 16,000 employees.
DGCA data showed SpiceJet’s decline against peers in recent years. In the second quarter of this year, the airline had a domestic market share of 4.2 percent, down from around 16 percent in the first quarter of 2020.
SpiceJet is struggling to add aircraft to its fleet after the collapse of Go First Airlines. Last December, the Aviation Working Group (AWG) downgraded India’s lessor rating to “negative” from “positive”.
The AWG downgraded India's rating after lessors could not get back their aircraft from Wadia group's grounded airline, Go First, which declared bankruptcy in May 2023.
"The secondary leasing market has become expensive for Indian airlines and finding good deals in the current environment has become difficult, and thus capacity addition is minimal,” said a second SpiceJet executive.
He added that wet-leasing aircraft from airlines in countries where domestic traffic hasn't quite picked up is the most feasible way for Indian airlines to add planes from the secondary market.
The second executive also said that Spicejet's aircraft leasing costs currently stand around $180-190 million per annum at present (for 38 aircraft) and to lease more aircraft the airline will need substantial funds for each additional plane in its expanded fleet.
In January, SpiceJet tried to raise Rs 2,250 crore via the issuance of shares and debentures. However, only one-third of the target (Rs 744 crore) could be achieved and later on February 22, a second tranche of Rs 316 crore under the preferential issue of equity and warrants was received.
On January 11, the beleaguered airline’s shareholders gave their approval to raise a total of Rs 2,241.5 crore through the issuance of equity and warrants — Rs 1,591.5 crore by issuing equity to 58 entities and Rs 650 crore by issuing warrants on a preferential basis to five other entities.
SpiceJet’s Chief Operating Officer (COO) Arun Kashyap and Chief Commercial Officer (CCO) Shilpa Bhatia recently resigned from the airline.
The carrier aims to reduce its workforce by about 15 per cent to reduce its ballooning operational costs.
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