Cash-strapped SpiceJet Airlines, which is looking to raise up to Rs 3,000 crore through a Qualified Institutional Placement (QIP), plans to use most of the funds for settlement or payment of outstanding liabilities to creditors, including aircraft and engine lessors, engineering vendors and financiers, according to the airline's QIP document.
The low-cost carrier is looking to raise up to Rs 3,000 crore through the QIP at a floor price of Rs 64.79 per share, the company said on September 16, informing exchanges about a preliminary placement document.
Out of the total proceeds from the QIP, Rs 750 crore will be utilised for the payment of outstanding liabilities to creditors, including aircraft and engine lessors, engineering vendors and financiers, Rs 601.5 crore for the payment of statutory dues, and Rs 410 crore for ungrounding and maintaining existing fleet and for purchasing new components, spare parts, and repairs.
Another Rs 370 crore will be utilised for fleet expansion, while Rs 118.9 crore will be used for paying employee dues and Rs 150.3 crore for paying dues to airports, the airline said as part of its QIP document.
Pending dues and flight delays
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 has also delayed paying the June 2024 salaries after it defaulted on its provident fund (PF) commitments. As of August 31, 2024, the airline had 7,824 employees, including 442 cockpit crew and 839 cabin crew on its payroll.
The QIP is SpiceJet's second attempt to raise money from the market, after trying to raise Rs 2,250 crore via shares and debentures in January.
However, only one-third of the target (Rs 744 crore) could be hit. Later, on February 22, a second tranche of Rs 316 crore under preferential issue of equity and warrants was received.
Payment of TDS and Provident Fund
As part of its 'payment of statutory dues', the airline plans to use Rs 297.5 crore as deposit of Tax Deducted at Source (TDS) with the Income-Tax (I-T) authorities, the QIP document said.
Another Rs 156.4 crore will be used for provident fund deposit as per Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, while Rs 145.1 crore will be used for payments under the Goods and Services tax (GST).
The Employees' Provident Fund Organisation (EPFO) had, in June 2024, said that it has recovered Rs 61 crore of the Rs 73 crore PF dues from March 2020 to May 2021. The EPFO was also evaluating the dues for the period following January 2022, which includes penalties and interest on late payments.
In August 2024, SpiceJet had 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. Earlier this year, it was reported that SpiceJet plans to cut its workforce by 1,400 employees, which represents nearly 15 percent of its total staff. This move forms part of the company's broader cost-cutting measures designed to maintain investor interest amidst ongoing financial difficulties.
Payment of dues to lessors
SpiceJet, in its document, said it plans to use Rs 750 crore for its liabilities for aircraft and engine lessors, engineering vendors, financiers and other creditors in 2024-25 and 2025-26.
The airline said that, as of June 30, 2024, its aggregate liabilities for aircraft and engine lessors, engineering vendors, financiers and other creditors stood at Rs 3,781.4 crore.
The company said that after it finalises payment of its dues to lessors, the airline will take back control of 13 Bombardier Q400, a turboprop aircraft from the de Havilland Canada Dash 8 family, and three Boeing 737 aircraft.
"The actual amount for each aircraft may vary, depending on the timing of the retirement and other commercial factors governing the arrangements with the particular lessor," the airline said.
Earlier this month, the Supreme Court (SC) agreed to consider listing SpiceJet's plea, challenging a Delhi High Court order that grounded three aircraft engines for defaulting on payments to lessors.
The low-cost airline had moved the top court on September 12, challenging the Delhi High Court's August 14 order of a single-judge bench.
A division bench of the Delhi High Court held that the carrier had violated an agreed interim arrangement for payment of dues and upheld an order of a single-judge bench, asking the low-cost airline to ground the three engines for defaulting on the payments.
The single-judge bench of the high court had, on August 14, directed SpiceJet to ground three engines by August 16 and hand them over to their lessors — Team France 01 SAS and Sunbird France 02 SAS.
Maintenance and ungrounding of existing fleet
SpiceJet said that it intends to restart operations of 24 aircraft using Rs 410 crore from the QIP proceeds. Though the airline said it intends to restart operations of its Bombardier Q400 and Boeing 737 aircraft, the exact number of aircraft was not shared.
"Currently, 36 aircraft are grounded, and depending upon the availability of spare parts and components, and the most optimal utilisation of resources, we intend to unground around 24 aircraft, comprising ones from the B737 family and Q400. Vman Aero Services LLP, an aviation asset management organisation, has evaluated the cost of recovery of our grounded aircraft through its certificate dated September 4, 2024," SpiceJet said on September 17.
As part of its plans to restart operations, SpiceJet plans to first review the current maintenance status of each aircraft, engine, prop assembly and landing gear and next check due of the specific asset, and also review the on-wing and off-wing component maintenance status and work scope required for each aircraft.
The airline then plans to review the shortfall in expendable, consumable, and hardware items for aircraft build-up, and perform a heavy check at its house base maintenance facility before looking to rent out engine, prop assembly, and landing gear.
Fleet expansion
SpiceJet plans to use Rs 370 crore for fleet expansion.
Earlier this month, Moneycontrol had reported that the airline, despite financial struggles, is betting big on the domestic civil aviation sector and looks to ramp up its fleet by leasing 10 new aircraft.
SpiceJet is looking to deploy its 10 new leased Boeing 737 aircraft on 60 popular and underserved destinations, according to sources.
The airline had held investor roadshows in Mumbai, Singapore and Hong Kong to generate interest for its upcoming QIP. It has appointed ICICI Securities, JM Financials and DAM Capitals as merchant bankers.
The stressed airline, on August 14, reported that it had stayed in the black in the first quarter of 2024-25 with a net profit of Rs 158.6 crore for the April-June period. The profit, however, was 19.7 percent lower than the Rs 197.53 crore reported in the year-ago period.
Its revenue came in at Rs 1,708.24 crore, down 14.7 percent on year from Rs 2,003.5 crore in the year-ago quarter, as the airline decided to reduce the scale of its operations.
As part of the ongoing summer schedule for 2024, which started on March 31 and ends on October 26, SpiceJet has indicated that it will operate 26 percent fewer weekly flights.
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