Its wings have been clipped and its financial wounds are bleeding it, but the beleaguered budget carrier SpiceJet is cruising along. How long will it be able to survive this way?
Most in the industry, and those with deep insight of airline business, say if things continue the way they are today the no-frill airline will have to shut down operations in four to five months. And if the situation deteriorates, then it would take it much less time to crash.
A senior executive of an airline, who did not want to be named, said reduction of Boeing fleet from 37 to 22 had already brought down troubled airline's cash flows, and now with the Directorate General of Civil Aviation's (DGCA) directive of curbing bookings beyond 30 days will dwindle it further.
"When inflow (of revenue) is not coming, how will they be able to manage outflow (expenditures). If they have to be in the air, they have to spend on jet fuel, aircraft leases, staff and other operational costs. The way things stand today, it will be difficult for them meet these costs with the revenue that is coming. This way, they will be able to survive not more than 4-5 months," he said.
As per his estimate, with the current fleet – and assuming a healthy load factor – SpiceJet's revenue must not be going beyond Rs 10-15 crore per day. This, according to him, was not enough to sustain an airline operation of SpiceJet's size.
He said SpiceJet was in urgent need of funds, which can come only from promoters as no investor would want to enter at the current stage when its operations are already on the brink of collapsing.
"Why should anybody put money when the promoter himself is not putting it? Why should creditors (like Airports Authority of India, oil marketing companies, lessors and others) put their money on stake when their dues are not being cleared. Who will bell the cat?" asked the airline executive.
He feels that the aviation regulator was not being unreasonable in taking stern action against the airline. "The DGCA had been harshly criticised when they did not take timely action when initial signs financial stress had started showing in the case of Kingfisher Airlines. Now, in this case, it is trying to control the damage before it assumes gargantuan proportion," he said.
Centre for Asia Pacific Aviation's (CAPA) chief for South Asia, Kapil Kaul has said without "firm and immediate promoter commitment of one time large recapitalisation", he does see any chances of recovery.
He has estimated immediate funding requirement of $150-175 million, followed by another tranche of the same amount. So the airline's total funding requirement for a recovery is $300-350 million.
The airline has been on a lookout for investors over the last one year without much success. To a question on whether there was anything left in the airline for investors, Capt G R Gopinath, pioneer of low-fare aviation in India, said, "Of course. It's traded on the stock exchange and they can pick up (Kalanithi) Maran's (current promoter of SpiceJet) stake followed by an open offer. It's a good airline. But it must be done as quickly as possible by injecting equity."
Hurtling down
With the current fleet – and assuming a healthy load factor – SpiceJet's revenue must not be going beyond Rs 10-15 crore per day, an aviation executive said
This, according to him, was not enough to sustain an airline operation of SpiceJet's size.
SpiceJet was in urgent need of funds, which can come only from promoters as no investor would want to enter at the current stage
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