Cash-strapped SpiceJet seeks government support to stay afloat

The embattled carrier SpiceJet Ltd's management approached the government on Monday for some relief from payment demands of oil firms and airport operators, after the promoters failed to come up with a fresh proposal on equity infusion in the cash-strapped carrier on the Directorate General of Civil Aviation (DGCA) deadline that expired on Sunday.

"They have requested for some relief. We will discuss that with seniors in the government, other ministries like finance and oil and take the issue up to the PMO. However, we have given no assurance to SpiceJet," minister of state for civil aviation Mahesh Sharma said, adding that the decision will be taken “considering wider interest of passengers”.

SL Narayanan, chief financial officer of Sun Group and Sanjiv Kapoor, CEO of SpiceJet, met Aviation Minister Ashok Gajapathi Raju besides Sharma and senior ministry officials to discuss the way forward for the carrier.

“The objective of meeting was to discuss financial impact of 30-day booking limit on the airline,” Kapoor wrote on the microblogging site Twitter.

Earlier this month, DGCA banned the loss-making airline from advanced bookings for more than 30 days, as the promoters failed to inject funds into the carrier or find an investor for the same. SpiceJet also had to reduce the size of its fleet by a third since September and cancel over 70 flights a day for the rest of this year. 

The regulator also cancelled around 183 of its landing and parking slots and told the company to pay pending salaries by 15 December. The carrier has a domestic market share of 17 per cent.

Meanwhile, stocks of the company tanked as much as 17 per cent on Monday on the BSE after the news and closed the day at Rs 13.90, up 2.58 per cent in weak Mumbai market.

As per a Times of India report citing sources, the Modi government is working out a revival package for the carrier as SpiceJet is facing fear of closure, which if happens, would send a negative signal globally. The package is said to be pegged to the airline raising funds in the next 10 days.

Fundraising has become essential for the budget carrier as accumulated losses have eroded the company’s net worth. With entry of new players such as AirAsia, the competition is only going to rise. 

The struggling carrier, which has been making losses since last year, reportedly has an immediate cash requirement of Rs 1,400 crore besides Rs 2,000 crore in the longer term to stay afloat.

Kalanithi Maran, who currently owns 54 per cent equity stake in the airline, brought in about Rs 250 crore into the airline this year.

In the quarter ended on September 30, 2014, the carrier reported fifth straight quarter of net loss of Rs 310 crore. SpiceJet incurred losses in six of the eight preceding quarters. Last time it booked profit was in the quarter ending June 2013.

Another carrier Kingfisher Airlines lost its flying permit and shut operations in 2012.

Meanwhile, media reports have suggested that DGCA has temporarily lifted the one-month booking restriction it had imposed on the carrier, allowing it to offer tickets till March 31, 2015.

(Edited by Joby Puthuparampil Johnson)

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