Amid GoFirst insolvency, SpiceJet to borrow ₹400 cr to revive 25 grounded planes

A day after GoFirst Airlines filed for insolvency with the National Company Law Tribunal (NCLT) on Tuesday, its rival SpiceJet plans to borrow around ₹400 crore to revive 25 grounded aircraft.

SpiceJet says funds for the revival will be drawn from the government’s Emergency Credit Line Guarantee Scheme (ECLGS) and better cash accruals. "The airline has already mobilised around INR 400 crore towards getting its grounded fleet back in the air, which will further enhance its top-line," says the Ajay Singh-led domestic carrier.

“We are meticulously working towards a return to service of our grounded fleet back in the air soon. The majority of the ECLGS funding received by the airline would be utilized for the same, which will help us capitalise and make the most of the upcoming peak travel season,” says Ajay Singh, chairman, and managing director, SpiceJet.

Gurugram-based SpiceJet operates a fleet of Boeing 737s and Q-400s, and is one of the country's largest regional players operating multiple daily flights under UDAN or the Regional Connectivity Scheme.

Reacting to the development, the SpiceJet stock soared 5.6% to ₹33.25 after opening higher at ₹31.95 against the previous closing price of ₹31.49 on the BSE.

The low-cost airline had recently restructured over $100 million outstanding dues to Carlyle Aviation Partner into equity shares and compulsorily convertible debentures (CCDs). Carlyle Aviation, which is an aircraft lessor, is the commercial aviation investment and servicing arm of private equity giant Carlyle's. Following the transaction, Carlyle Aviation will hold over 7.5% equity stake in the airline.

SpiceJet had earlier completed the hive-off process of its cargo and logistics division ‘SpiceXpress’ into a separate entity, SpiceXpress and Logistics Pvt Ltd. The hive-off paved the way for SpiceXpress to raise funds independently.

SpiceJet's announcement can be seen in the backdrop of GoFirst halting operations. Like for other airlines, it poses an opportunity for SpiceJet to grab the lost market share. The airline commanded a market share of 8.9% in the calendar year 2022, and sudden disruption in operations is likely to benefit other players amid supply constraints.

As of March 2023, IndiGo commanded the largest market share at 56.8%, followed by Vistara at 8.9%, and Air India at 8.8%, as per DGCA data. The passenger load factor (PLF) for various airlines in March 2023 shows SpiceJet recorded the highest PLF at 92.3%, followed by Vistara at 91.6%, and GoFirst at 90.2%.

Net profit of SpiceJet surged 160% year-on-year to ₹110 crore for the quarter ended December 31, 2022, aided by strong performance in both passenger and cargo businesses. Revenue from operations rose 2.5% to ₹2,316.8 crore in the third quarter compared with ₹2,262.6 crore in the corresponding period last fiscal.