With the Marans, who held over 53 per cent stake in SpiceJet, transferring their entire stake in the airline to Ajay Singh, the low cost airline has literally been brought back from the brink.

SpiceJet shares breached the upper circuit and rose 10% to Rs 20.50 on the BSE in morning trade.

The announcement of transfer of ownership, management and control of SpiceJet to Singh on Thursday brought to an end the close to a month long period of uncertainty about the future of the airline and its employees. At one stage in mid-December, the Marans were looking to shut down the airline as they were upset with the fact that there was no help forthcoming from any quarter.

A senior Sun TV official had flown down to Delhi to make the closure announcement in front of the national media. But with the Government worried at the consequences an airline closing down and what impact it would have on passengers and the families of those working for the airline, all efforts were made to provide a helping hand.

It was around this time that Ajay Singh, a known BJP sympathiser, who had earlier met with the Marans in August and made an initial offer for the airline re-entered the picture. Ajay is close to the ruling BJP and was earlier associated with its leader Pramod Mahajan. He is also said to be one of the persons behind the party’s latest electoral campaign which swept Narendra Modi to power.

While things did not work out in August, in December Singh revived his offer and put together a team along with JP Morgan to bail out the cash- strapped airline. The contours of the deal, which is being vetted by the Ministry of Civil Aviation, have not been made public as yet. Singh is said to have tied up with JP Morgan to pump in up to $200 million into the airline. On December 5, the airline owed Rs 1,600 crore to debtors.

Ban on advance bookings may go

Now with new investors in place the crucial thing for the airline will be the Directorate General of Civil Aviation lifting the ban on SpiceJet taking bookings beyond March 28 this year. In early December, worried by the number of flights that the airline was cancelling, Prabhat Kumar, the then DGCA, had stopped SpiceJet from taking passenger bookings beyond 30 days.

But after the airline explained to the Ministry that forward bookings helped generate revenues and pleaded for lifting the ban it was allowed to take bookings till March 28. Sanjiv Kapoor, Chief Operating Operator of SpiceJet had told BusinessLine that on a normal day about one-third of the airline’s revenues came from bookings beyond 30 days. "If you have a sale or promotion it is much higher. If you cut that booking period of beyond 30 days immediately almost one-third of the revenue goes away. At a time when we are trying to turn around and generate revenues, pay off liabilities and meet payments it makes it harder. That is why we are saying it will be counterproductive,” he had argued after the DGCA’s decision.

Changes in the offing

Now with a new management on board some changes can be expected in those managing the day to day running of the airline. People close to Ajay Singh say he that blames the reckless discount ticket sales that SpiceJet had through the year for its poor financial situation. Singh is also keen to make SpiceJet a truly low cost airline, a move which might see the airline not offering any food on its flight and also not charging for premium seating. The airline currently charges a fixed amount over and above the cost of the ticket from passengers wanting to sit in the first few rows and on seats providing extra leg room space. It also charges for food which is served on board.

Under the new management, SpiceJet is also likely to have a relook at its fleet---- it currently has a fleet of Boeing and Bombardier aircraft making it the only low cost airline in the country to operate two types of aircraft. The new management is also likely to take a close look at the number of cities to which the airline operates, the current level of manpower and the contracts that have been entered into to control costs.

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