Low-cost airline SpiceJet Ltd has on March 26 announced a settlement with Export Development Canada (EDC) to settle liabilities worth Rs 755 crore, prompting a sharp uptick in the share price on BSE. The agreement is being termed by the airline as the 'biggest breakthrough in SpiceJet’s financial restructuring efforts".
The settlement will generate savings to the tune of Rs 567 crore for the airline. At 1315 hours on March 26, SpiceJet's shares on BSE were trading 3.5 percent higher at Rs 61 apiece.
As per the agreement, SpiceJet will now acquire full ownership of 13 EDC-financed Q400 aircraft.
"Under the agreement's terms, SpiceJet will acquire full ownership of 13 EDC-financed Q400 aircraft, bolstering the airline's operational capabilities and fleet management. This pivotal agreement marks a significant milestone in SpiceJet's pursuit of financial stability, demonstrating its commitment to prudent financial management and long-term prosperity," said the airline in a statement.
As part of the settlement, SpiceJet will pay a comprehensive settlement amount to resolve outstanding liabilities amounting to close to Rs 755 crore as per SpiceJet books of accounts. "This settlement not only alleviates SpiceJet of a substantial financial burden but also lays the groundwork for a fortified balance sheet and substantial savings for the airline," said the airline.
Ajay Singh, Chairman and Managing Director of SpiceJet, said, "We are pleased to have reached this settlement agreement with EDC and we thank their leadership and management team for their cooperation, understanding and progressive approach through the process. This significant milestone will allow us to strengthen our balance sheet and position the airline for long-term success."
The liabilities stem from a loan acquired by the airline in 2011 for the procurement of 15 aircraft. With twelve of these Q400s currently grounded, their refurbishment and subsequent return to service will enable SpiceJet to promptly launch flights on numerous regional and UDAN routes, it said.
SpiceJet has over the last few months reached settlements with multiple lessors, including the world's largest aircraft lessor, Aercap, as the company looks to restore its grounded fleet and return to full capacity.
"This agreement heralds immense long-term savings for SpiceJet, liberating the airline from the obligation of regular monthly rentals for these aircraft. The accord with EDC represents a substantial boost for SpiceJet, reaffirming its resilience and determination to surmount financial challenges and emerge as a vastly stronger entity in the Indian aviation landscape," said SpiceJet on Tuesday.
As of March, the airline had an operational fleet of 39 aircraft, mostly Boeing 737s, and a few Bombardier Q400 jets. The airline's complete ownership of the Q400 jets would let it launch new flights on regional routes, it said.
Jet manufacturer Bombardier is a Canada-based firm.
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