Low-cost airline SpiceJet was literally brought back from the brink, with the Marans, who held a stake of over 53 per cent in the airline, transferring their entire stake to co-founder and former promoter Ajay Singh.
The announcement of transfer of ownership, management and control of the airline to Singh on Thursday brought to an end a month-long period of uncertainty about the future of SpiceJet and its employees. In mid-December, the Marans were looking to shut down the airline as they were upset that no help was 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 Centre worried at the consequences of an airline closing down and the impact it would have on passengers and employees, efforts were made to provide a helping hand.
It was around this time that Ajay Singh, a known BJP sympathiser, who had met the Marans in August and made an offer for the airline, re-entered the picture. In December, Singh revived his offer and put together a team along with JP Morgan to bail out the airline. The contours of the deal, which is being vetted by the Ministry of Civil Aviation, have not been made public yet.
Singh is said to have tied up with JP Morgan to pump in up to $200 million (₹1,237 crore) into the airline. As on December 5, the airline owed ₹1,600 crore to debtors.
Next stepsWith new investors in place, it is now crucial for the airline to get the Directorate General of Civil Aviation to lift the ban on bookings beyond March 28. In early December, worried by 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 the ban to be lifted 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, this makes it harder. That is why we are saying it will be counterproductive,” he had argued after the DGCA’s decision.
‘Reckless discounts’People close to Ajay Singh say he blames the reckless discounts that SpiceJet had offered through the year for the airline’s poor financial situation. Singh is keen to make SpiceJet a truly low-cost airline, a move that might see the airline not offering any food on its flight and not charging for premium seating.
Under the new management, SpiceJet is also likely to revamp its fleet, which currently consists of Boeing and Bombardier aircraft, making it the only low-cost airline in India to operate two types of aircraft.
This adds to the airline’s costs. The new management is also likely to take a close look at the number of cities to which the airline operates.