With 30-40 flight cancellations, a pilot exodus and a dip in its fleet-size, SpiceJet is going through rough weather, prompting aviation regulator Directorate General of Civil Aviation (DGCA) this week to ask it to submit a written reply on its position.
Industry sources described the situation at SpiceJet as “grave”. The budget airline’s daily flights have fallen from 345 in July to 300 now, and its Boeing 737 fleet from 35 in July to 28 — of which two are not operational.
“We are going through a fleet restructuring. We have changed our schedule. I don’t know the exact number (of cancellations). There is some short-term pain,” SpiceJet chief operating officer Sanjiv Kapoor said. “By December we should have 35 B737s and by mid-2015, between 45 and 50.”
Pilots, as reported by HT in August, are leaving the airline in large numbers as it struggles to get an investor on board. SpiceJet promoter and media baron Kalanithi Maran, who holds 53.48% stake in the airline, is in talks to sell his stake in the airline, HT had reported on August 8.
The airline had said on May 20 that it was in advanced talks with an “external entity” for a capital infusion, but nothing has materialised. “SpiceJet, for the new investor, will be a high risk and high reward game,” said Kapil Kaul, South Asia CEO of Centre for Asia Pacific Aviation.
“Recapitalisation is needed. Obviously, activity is ongoing on that,” said Kapoor without elaborating further.
While Maran has pumped in about Rs 250 crore into the airline this year, it may not be enough. “Spicejet has a requirement of $250 million to stabilise operations and continuous capital flow in the near term,” Kaul said.
“SpiceJet will ride this out and become better for being a smaller more agile player ultimately,” said Saj Ahmad, a London-based aviation expert.
The airline reported an Rs 310 crore loss for the September quarter – its fifth straight quarterly loss. The loss came despite a fall in the price of fuel and rupee’s appreciation against the US dollar.
“It is critical for SpiceJet to turn profitable in Q3 especially with lower fuel prices. SpiceJet’s survival and recovery is critical for the industry,” said Kaul told HT.
The airline’s combined losses from 2006-07 to 2013-14 was Rs 2,194 crore while total debt as on March 2014 is Rs 1,738 crore. SpiceJet’s total cash position as on March 2014 is just Rs 5 crore , while its net worth was a negative Rs 1,019 crore.
Its auditors have raised red-flags over the company’s ‘going concern’ status. “As of that date (September 30, 2014) the company’s total liabilities exceed its total assets by Rs 1,459.7 crore. These conditions... indicate the existence of a material uncertainty that may cast significant doubt about the company’s ability to continue as a going concern,” auditor SR Batliboi & Associates had said.
A company is typically known as a ‘going concern’ if it has sufficient resources to continue to operate indefinitely and to avoid potential bankruptcy risks.