SpiceJet enters settlement agreement with Boeing over claims related to grounded 737 MAX aircraft

A SpiceJet aircraft | Representative image

Domestic airline SpiceJet has entered into a settlement agreement with aircraft manufacturer Boeing, the company informed the exchanges on November 17.

In a filing with the BSE, SpiceJet said it has entered a settlement agreement with Boeing wherein “Boeing has agreed to provide certain accommodations and settle outstanding claims related to the grounding of 737 MAX aircraft and its return to service”.

The release further said that the agreement “paves the way for induction of efficient and younger MAX aircraft” into SpiceJet’s fleet, and “ensures the resumption of new aircraft deliveries from our order of 155 MAX aircraft”.

The newest statement comes after SpiceJet on September 13 said it entered into a settlement with CDB Aviation, a major lessor of Boeing 737 Max aircraft. Prior to this the airline on August 26 also informed that it has agreed to a settlement with Avolon, another major lessor of this aircraft.

In a statement, the budget carrier said that it expects to start operations of MAX aircraft around the end of September 2021, subject to regulatory approvals. Currently, in India, only SpiceJet airline has Boeing 737 Max aircraft in its fleet.

India lifts ban

India's aviation regulator, the Directorate General of Civil Aviation (DGCA) on August 26 lifted the ban on Boeing 737 Max planes' commercial flight operations after almost two-and-half years.

On March 13, 2019, all Boeing 737 Max planes were grounded by the DGCA in India after the crash of an Ethiopian Airlines 737 Max plane on March 10 near Addis Ababa which killed 157 people, including four Indians.

Later, in an order dated August 26, 2021, the DGCA said that since the orders issued by the Federal Aviation Administration (FAA) and the European Union Aviation Safety Agency (EASA) in October and November last year, it "has been closely monitoring the global trend with regard to un-grounding" of 737 Max planes.

A total of 34 airlines across the world have operated 1.22 lakh flights using 345 Max aircraft, since the plane was ungrounded late last year, without "untoward reporting", India's aviation regulator said.

Therefore, the DGCA stated that the operation of Boeing 737 Max planes in India are permitted "only upon satisfaction of applicable requirements for return to service".

Company performance

SpiceJet on November 12 reported a loss of Rs 561.7 crore for the quarter ended September 2021 (Q2FY22). The company had posted a loss of Rs 112.5 crore in the year-ago period. In the previous quarter (June 2021), the loss stood at Rs 729 crore.

Also Read | Making sense of SpiceJet's Q2 results: Can the airline make a comeback?

Revenue from operations came in at Rs 1,301.7 crore, up 28 percent against Rs 1,016.1 crore in the corresponding quarter of the previous fiscal. Total revenue from operations came in at Rs 1342.5 crore, up 27.2 percent against Rs 1,055 crore logged in the September 2020 quarter.

Total expenses increased to Rs 2,100.4 crore in the period under review from Rs 1,405.6 crore in the second quarter of 2020-21. The airline had incurred a net loss of Rs 729 crore in the first quarter of the current financial year.

"With the nationwide vaccination drive growing at an unprecedented pace across geographies, there is a significant jump in travel demand and we are very excited about the demand recovery," Ajay Singh, Chairman and Managing Director, SpiceJet, said.