Cash-strapped airline SpiceJet was forced to ground its operations on Wednesday until 4 pm, leaving thousands of passengers stranded across the country after oil companies refused to give credit despite the civil aviation ministry’s intervention to support the airline on Tuesday.
While the airline was able to resume some flights after it made part-payment of Rs 3 crore in cash to oil companies in the evening, hopes of a revival are hanging in the balance as the government has distanced itself from Tuesday’s attempt to bail it out. According to sources, around 75 flights were to be operated by SpiceJet by the end of Wednesday.
On Tuesday, the civil aviation ministry had announced a series of measures to get the airline out of the woods, which included asking banks to give working capital loans of up to Rs 600 crore and requesting oil companies for a 15-day credit line instead of insisting on payment in cash. However, minister of state for civil aviation Mahesh Sharma on Wednesday clarified the ministry had not given any assurances of a bailout but mere suggestions. He said the government could not support an individual airline and was waiting for a concrete funding plan from SpiceJet.
Meanwhile, official sources say SpiceJet’s daily revenue has fallen drastically from Rs 14-15 crore a day to merely Rs 50 lakh after restrictions on accepting bookings beyond 30 days in advance were imposed on the airline on December 5. The cash paid for oil companies on Wednesday was enough for flights up to 9 pm on the day, after which supplies would again be stopped. “We follow a cash-and-carry model for fuel supply to SpiceJet. We have so far not heard from the government on the issue of resuming supplies,” a senior executive of Indian Oil Corporation (IOC), the country’s largest fuel retailer, told Business Standard.
Banks, which have given over Rs 600 crore in loans, are also taking a hardline. “Our exposure in SpiceJet is backed with collateral. Theoretically, we are not going to lose our money. But even if we lose what we have lent we are not going to try and salvage it by providing additional loans. It does not make sense for us,” a senior banker with a private bank told Business Standard.
Worse still, promoters are not willing to pump in any more money and have put the ball in the court of the banks. The Sun group promoters Kalanathi Maran and family own 75 per cent stake (valued around Rs 10,000 crore) in the profitable Sun TV Network and have enough cash to pay immediate liabilities of Rs 1,400 crore (the airline owes this to oil companies, lessors, airport operators and vendors). But S L Narayanan, Sun group’s chief financial officer, told Reuters, “We do not have the liquidity to invest large sums at the time, which is why we need bank financing. For which the promoters are willing to provide a guarantee. We cannot do more than this.” The promoters have already injected around Rs 650 crore into the company after its acquisition.
Sudden cancellations during the holiday season have led to a steep increase in fares across the sector. Tickets between Delhi and Kolkata for the evening were available at a staggering Rs 38,000 to Rs 41,000 apiece on Wednesday and even on the Delhi-Mumbai sector fares shot up to over Rs 20,000 a ticket as stranded passengers looked for alternatives. The ministry of civil aviation is now looking at asking regulator Directorate General of Civil Aviation (DGCA) to issue an advisory to other airlines not to exploit the current situation by raising fares exorbitantly.
Angry passengers and holiday-goers crowded SpiceJet counters at airports across country, seeking immediate refunds or alternate arrangements. With a lack of clarity from SpiceJet on its next course of action, online travel agencies such as MakeMyTrip and Yatra.com temporarily suspended SpiceJet bookings but resumed those by Wednesday evening.
Some hope of the airline getting an investor to pump in money rose in the evening when SpiceJet’s former director and founder Ajay Singh met ministry officials, hinting that he, backed by some investors, could be interested in investing in the airline. Singh did not comment but sources said he was exploring investment options.