SpiceJet Asked to pay $31.5 Million to
Airport Authorities.
New Delhi - Where's the money, honey? That, in
essence, is what the Ministry of Civil Aviation has told SpiceJet's ex-promoter
Ajay Singh. Singh has been leading a consortium of investors who want to rescue
the low-cost carrier.
Sources
close to Singh say he is in talks with two foreign PE investors for raising
about $200 million but any deal will happen only by next month. Sometime next
week, Singh is expected to present a detailed investment plan to the aviation
regulator DGCA.
But
SpiceJet needs cash for daily operations - it needs to pay oil companies daily
to buy fuel, its dues to airport operators are mounting and other payments like
lease rentals on aircraft etc are also due. The question that senior ministry
officials put to SpiceJet and Singh yesterday is the same old one: until the
big investment comes in, how do they plan to run the airline in the interim?
A
source who was privy to yesterday's meeting in which SpiceJet management, Singh
and a raft of ministry top brass was present, says the airline has sought
deferment of payment of service tax dues and also wants payments to oil
companies be deferred by a month. It was payment of tax arrears (service tax
and income tax) in November which actually lead to the present crisis at
SpiceJet as it fell short of cash even for daily operations.
it is now almost clear
that the the Maran family may have decided to completely exit the airline. AFP
Oil
companies have in the past made it clear that unless SpiceJet pays each time it
lifts fuel, it will not be given any fuel. The Airports Authority of India, to
which the airline owes well over Rs 200 crore in dues, has also been waiting
for these to be cleared.
Earlier,
ministry officials had set December 31 as deadline for at least some money
coming into the airline by potential investors so that some dues are cleared.
Now, there are doubts over whether this deadline will be met.
An
official in the ministry said whether the AAI will put SpiceJet on cash and
carry after Wednesday will be decided soon. Cash and carry would mean each time
a SpiceJet flight wants to take off from an AAI airport, it has to first pay
the airport charges.
Separately,
a source close to Singh denied there was any a December 31 deadline given them
for bringing in a part of the proposed investment. They say talks are on and
the entire deal will likely be stitched by mid-January. Another source close to
negotiations with potential investors said there could be an immediate
investment of up to Rs 500 crore by Singh and his consortium.
As
SpiceJet lurches into another liquidity crisis, it is clear that the promoters
- the Maran family - may have decided to completely exit the airline. The
second source quoted above said Singh and his team want to run the airline with
their choice of management, making it clear that some sort of a management
rejig is also imminent.
This
source pointed out that in its present form, the airline is "top heavy"
with some people in the top management drawing unacceptably high salaries.
"Whenever there is a change in ownership, there has to be a change in
management," this source said without elaborating.
He said
Singh wants to get back to the airline he exited some years back because he
sees immense potential in the Indian aviation industry. Besides, SpiceJet has
airport slots, aircraft and all the paraphernalia for running an airline and
investing in it would be cheaper than starting an airline from scratch.
This
source said there is no decision yet on whether to phase out the Q400 fleet of
smaller Bombardier aircraft (SpiceJet also flies Boeing 737s). "May or may
not be phased out. With the Q400s, what works is significantly less cost of
operation compared to the Boeing fleet and the ease of operation in tier II and
smaller cities. One can charge the same amount as a Boeing seat so the
differential between cost and revenue works in favour of retaining this fleet.
But then, maintenance costs rise and this needs to be also considered."
This
source said SpiceJet is at present operating 18 Boeing aircraft as three others
are grounded due to maintenance issues.
To sum
it all up, SpiceJet may get investment but perhaps needs some sort of a bridge
fund till the big investment comes in. There has been some talk of the airline
wanting to raise funds through the external commercial borrowing route - but
the Ministry has merely proposed easier ECB norms, these have not been
implemented yet.
Singh
and his partners need to pump in some money by next week or convince the
ministry of civil aviation that they have an iron clad investment plan.
