The Narendra Modi government is pulling out all stops to rescue bleeding SpiceJet, which is on the verge of a collapse.
The aviation ministry said on Tuesday that banks and financial institutions will be requested to lend up to Rs 600 crore to SpiceJet, backed by a personal guarantee from its promoter, media tycoon Kalanithi Maran.
“This should be paid immediately after securing the long term investment which will take around eight weeks to consummate,” the ministry said.
On a day when a majority of SpiceJet’s 239 flights were either delayed or cancelled (only three took off from Delhi out of the over 70 scheduled departures), aviation minister Ashok Gajapathi Raju appealed to finance minister Arun Jaitley to help it get funding from banks.
Raju wrote to Jaitley that SpiceJet’s request for provision of finance may be considered favourably by the finance ministry “so that they can overcome their present problems”.
The aviation ministry also sent a detailed report to the Prime Minister’s Office on Tuesday.
Several other steps were announced that would help the airline tide over the immediate crisis. Aviation regulator DGCA has lifted its ban on SpiceJet accepting bookings beyond one month; the airline can now take bookings up to March next year.
Airport Authority of India will give the airline 15 days to meet outstanding payments. “Oil companies would be requested to give credit for up to 15 days. The daily off-take of the airline is about Rs 5 crore. This would amount to about Rs 75 crore in 15 days,” the ministry said.
“SpiceJet would give commitment of increasing sufficient appropriate capital within a short period of time,” the ministry said. “Ministry of finance will be requested to permit External Commercial Borrowing (ECB) for working capital as special dispensation, as was done in the 2012 when a similar crisis had arisen in the aviation sector,” it said.
“Every effort should be made by government to make sure SpiceJet doesn’t go the Kingfisher way,” said aviation veteran Rajji Rai.
SpiceJet COO Sanjiv Kapoor, in a letter to aviation minister, said the airline will submit its schedule until October 15, 2015 in two days, and deposit Rs 7 crore from its daily collection towards fuel, airport and statutory taxes once operations normalised.
“The image of India will take a hit, risk perception of Indian aviation will escalate and it will have adverse affect on FDI,” Kapoor wrote. Spicejet did not offer comments for this story.
“Without immediate and significant funding, I see SpiceJet as a closed case,” said Kapil Kaul, South Asia CEO of CAPA. “Not sure how such a large funding will be secured in such a short time especially as the promoter seems unwilling,” said Kaul.
Despite a large and increasingly affluent and mobile population, airlines in India have struggled to make a profit.
Most make heavy losses as they struggle to raise fares above the operating costs in a highly competitive market.
SpiceJet, which has been in the red since last year, has already cut the size of its fleet by a third since September and
cancelled more than 70 flights a day for the rest of this year.
(with agency inputs)