Is aviation regulator DGCA being harsh on SpiceJet?

Even as troubled budget carrier SpiceJet is sinking, there's a strong feeling in the aviation industry that the government is not extending a helping hand. The industry feels some of the Directorate General of Civil Aviation's (DGCA) actions are only helping the airline's collapse.

One such voice is that of Capt GR Gopinath, pioneer of low-fare aviation in India. "SpiceJet needs to be given breathing time to find investors. The government has to figure out ways to support the airline in the absence of bankruptcy protection laws," he said.

What are industry experts saying?
Capt Gopinath says government and banks should make a distinction between promoters and the company. "If promoters are responsible, act against them and save the airline and jobs. Consumers will also benefit as it will prevent a monopoly from being built," he argues. In the US and other developed countries, there are strong and effective bankruptcy laws to bail out companies and safeguard jobs.

What is CAPA's stand?
Centre for Asia Pacific Aviation's chief of South Asia, Kapil Kaul, says: "I don't approve of the DGCA directive on immediate cancellation of slots and forward-booking restrictions as this will seriously hurt the airline's recovery chances. Public disclosures of such directives is another area of concern. This should have been commercial and in confidence between DGCA and SpiceJet unless safety oversight was compromised and merited public disclosure."

What action has DGCA taken against SpiceJet?
It has taken stringent action against SpiceJet by barring it from making bookings beyond a month and other such measures.

What role do they want the DGCA to play?
Kaul expects DGCA to play an enabling role when it comes to instilling confidence in the staff and market and potential investors. DGCA and the government shouldn't been seen as aiding an airline closure. "Give no undue favours but play a constructive role in an open and transparent manner, similar to what the government would have done for Air India," is what he says.

Can the airline still stay afloat?
A "firm and immediate promoter commitment" of one-time large recapitalisation can stabilise that airline's operations and instill staff and passenger confidence, feels Kaul.
"SpiceJet can't wait for a strategic or financial investor for a few more weeks and the promoters may need to provide interim (but large) funding till the investor is secured. The promoter is financially strong and has demonstrated continuous commitment in the past but may need to make some bold commitments again," he said.

Was the airline late in scouting for investors?
Capt Gopinath says the airline should have got on board an investor much earlier as it would have brought discipline and professional management. "It appears there was a reluctance to bring in investors," he said.

What's the immediate funding requirement?
As the airline slips, Kaul expects SpiceJet's losses for the December and March quarters to widen. As it happens, its funding requirement could shoot up to $300-350 million from the earlier $250 million. Kaul said SpiceJet's immediate funding requirement to stabilise operations is $150-175 million. "CAPA's estimate of $250 million in March this year looks very conservative now, given that fiscal 2015 losses will be much higher than last year. So, immediate funding of $150-175 million should be done by another large tranche of over $150-175 million. So, we are looking at $300-350 million to allow SpiceJet to move towards recovery," he said.