In 2023, SpiceJet 8.39 million passengers and had a domestic market share of 5.5%.
Financial trouble for low-cost carrier SpiceJet seems to be rising. Investors who had committed to infuse funds worth Rs 2,250 crore on a preferential basis, are having second thoughts due to acute liquidity crunch the company is facing, which may make its operations unviable.
In December, the company’s board had approved fund raising proposal of Rs 2,250 crore through issuance of securities on a preferential basis. On January 26, the carrier received Rs 744 crore as first tranche. Sources said that it is unlikely that further fund infusion will happen by the investors.
Sources added that SpiceJet has delayed payment of January salaries to many of its employees. It has also delayed depositing the money due to pension funds and taxes deducted from the salaries.
When contacted, a company spokesperson said that January salaries to 80% of the employees have been paid. The amount due for provident fund and tax deducted at source will be made soon and within stipulated timeline.
“We have successfully completed the first tranche of capital infusion, amounting to Rs 744 crore, and have received significant additional subscriptions pending regulatory approval. The company has initiated the process to raise an additional Rs 1,500 crore. SpiceJet already has the valid and subsisting approval of shareholders for raising up to Rs 2,500 through QIP, and for this process, it need not go to shareholders again. We want to clarify that regular payments are being made to lessors, and any reports suggesting outstanding amounts are baseless and denied,” the spokesperson said.
“The airline has extended many aircraft leases and has also signed up for fresh lease agreements starting in the summer schedule 2024. SpiceJet is actively engaged in discussions for long-term lease contracts with lessors, signalling our commitment to expand our fleet and network,” the spokesperson added.
On February 12, SpiceJet said that it plans to bring down its annual cost by around Rs 100 crore, mainly by laying off employees. Though it did not reveal the number of employees who will be asked to leave as part of manpower rationalisation programme, sources said that the number could be around 1,000-1,500. SpiceJet currently has around 9,000 employees.
“As part of our turnaround and cost-cutting strategy, following the recent fund infusion, SpiceJet has initiated several measures, including manpower rationalisation, aimed at achieving profitable growth and positioning ourselves to capitalise on the opportunities in the Indian aviation industry. Through this initiative alone, we anticipate an annual saving of up to Rs 100 crore,” the company had said. It feels that it has excess manpower compared to the number of planes in service. The layoffs are expected across departments and the final list is being prepared, sources said. People from the management and consultancy are working on chalking out the contours of letting staff leave, and all the departments have been asked to give their inputs, sources added
Apart from facing financial headwinds, SpiceJet is also facing several legal battles.
The airline has also stopped operations on certain RCS (regional connectivity scheme) routes and at those stations, there is excess manpower, especially staff with lower salaries.
Currently, SpiceJet has a fleet of little over 30 aircraft apart from 10 planes that are on wet lease.
The carrier will prioritise fleet upgrades, enhance on-time performance and cost-cutting measures will be implemented to streamline operations, according to an internal note last month.
The airline has also availed funds worth around Rs 1,000 crore under the government’s emergency credit line guarantee scheme (ECLGS) and its chairman and managing director, Ajay Singh has committed to infuse Rs 500 crore.
Some of the carrirer’s lessors have moved court to take back their leased aircraft due to non-payment of dues.
In 2023, SpiceJet 8.39 million passengers and had a domestic market share of 5.5%.
On Wednesday, the company’s share price closed down 3.44% at Rs 63.37 on the BSE.
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