Indian low-cost airline SpiceJet is in discussion with banks and financial institutions to raise some Rs 2.5 billion in fresh capital. It is also seeking shareholder approval for raising funding through the issue of eligible securities to qualified institutional buyers, the airline said on June 30 in its financial year 2020-2021 results. SpiceJet is seeking Rs 2.5 billion in capital.
SpiceJet reported a Rs 9.983 billion net loss for the March to March period, compared to Rs 9.347 billion in the previous year. Passenger services produced an Rs 11.3 billion loss compared to a negative Rs 8.0 billion in 2019-2020. Cargo saved the day and saw a Rs 1.3 billion profit compared to a Rs 1.3 billion loss the previous year. Revenues from operations were Rs 51.3 billion versus Rs 123.6 billion last year.
From March 25 until May 24, 2020, SpiceJet had to ground all operations after India had entered a nationwide lockdown. Operations resumed on May 25 but only on the domestic network. The Indian government has continuously extended the ban on international operations. It announced on Wednesday that the ban will extend until July 31, which follows the effects of the second Covid-wave that has hit India hard since late February. The wave ended SpiceJet’s recovery and significantly impacted revenues and profitability. The Q4 loss (January-March) was Rs 2.353 billion compared to a negative Rs 8.070 billion in the previous year.
The airline’s management is optimistic about its chances in the long term. As said, SpiceJet is seeking Rs 2.5 billion in capital. If it succeeds, the carrier will be able to achieve profitability again and meet its liabilities. Over the last financial year, liabilities increased from Rs 65.5 billion to Rs 77.6 billion. “These conditions indicate the existence of uncertainty that may create doubt about the Company’s ability to continue as a going concern. However, based on the factors mentioned in this note including re-negotiation of payment terms to various parties, the management is of the view that the going concern basis of accounting is appropriate”, SpiceJet says in the report.
The carrier has been reducing its expenditures by renegotiating various operational contracts, including those with aircraft lessors and maintenance contractors. It is in negotiations with lenders about the deferral of dues and other waivers.
Claim initiated against Boeing…
While SpiceJet is eagerly awaiting the Indian regulatory agency’s decision to clear the Boeing MAX for return to service, the airline continues to incur various costs of Rs 5.6 billion that are related to the lease of capacity elsewhere and other costs. They have been recognized as other income. The carrier has initiated a process of claims against Boeing towards costs and losses and is “confident” of the ultimate collection of this income. SpiceJet has parked thirteen MAX 8s with 129 unfilled orders, according to Boeing.
… and conflict with DHC over the termination of order
The financial document also discloses that SpiceJet is embattled in a legal claim with De Havilland Canada about the termination of a purchase agreement for undelivered Dash 8-400s. SpiceJet ordered 25 Q400s with Bombardier with 25 options when the aircraft was still produced by the trains and planes manufacturer. SpiceJet operates 32 8-400s, which include aircraft that have been delivered before late 2017. The DHC production list shows at least three undelivered aircraft that are in storage at Downsville, where production will be terminated.
SpiceJet says it has filed a claim of Rs3.2 billion against the airframer “for declarations, liquidated damages, interest, and costs relating to the Company’s alleged breaches of, and the manufacturer’s purported termination of the purchase agreement for certain undelivered aircraft.” In a summary judgment, the court has ruled in favor of De Haviland Canada. However, SpiceJet says the case is presently pending adjudication before the Court of Appeal.