Is Kalanithi Maran owned SpiceJet airlines heading the Kingfisher way? That’s the question being asked in aviation circles, the ministry and industry today. Rivals are claiming that the airline is “going down rapidly” and that this is the “beginning of the end”.
On what are people basing their claims? One, the airline has been announcing a series of fare discount schemes – a tactic usually resorted to mop up cash when cash flow problems begin to occur. The latest scheme (which follows the Rs 1 fare scheme that was frowned upon by the Director General of Civil Aviation) – South and East routes – is probably the fourth scheme in as many months of 2014 introduced by the airline to try and shore up revenues and generate some cash.
When contacted with a detailed questionnaire, SpiceJet declined to comment. It denied any default on lease payments however.
A senior government official told BusinessWorld that the airline is financially stressed and has been hoping to tide over its immediate cash flow problems by introducing these discount schemes. “This typically is of limited use as rivals match them and no one ends up any richer”, he adds.
But perhaps even more serious than this is the position as far as the leased aircraft go. According to industry sources, Babcock and Brown (one of the biggest lessors to the airline) have threatened to terminate the lease on three of the aircraft (in March) currently with the airline after facing delays in lease rental payments this year and sensing that the trouble runs deeper. The airline also “narrowly escaped a termination notice from Avalon (one of the other lessors) two weeks ago. Catering companies are complaining of delayed payments.
09/04/14 Anjuli Bhargava/Business World
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On what are people basing their claims? One, the airline has been announcing a series of fare discount schemes – a tactic usually resorted to mop up cash when cash flow problems begin to occur. The latest scheme (which follows the Rs 1 fare scheme that was frowned upon by the Director General of Civil Aviation) – South and East routes – is probably the fourth scheme in as many months of 2014 introduced by the airline to try and shore up revenues and generate some cash.
When contacted with a detailed questionnaire, SpiceJet declined to comment. It denied any default on lease payments however.
A senior government official told BusinessWorld that the airline is financially stressed and has been hoping to tide over its immediate cash flow problems by introducing these discount schemes. “This typically is of limited use as rivals match them and no one ends up any richer”, he adds.
But perhaps even more serious than this is the position as far as the leased aircraft go. According to industry sources, Babcock and Brown (one of the biggest lessors to the airline) have threatened to terminate the lease on three of the aircraft (in March) currently with the airline after facing delays in lease rental payments this year and sensing that the trouble runs deeper. The airline also “narrowly escaped a termination notice from Avalon (one of the other lessors) two weeks ago. Catering companies are complaining of delayed payments.
09/04/14 Anjuli Bhargava/Business World
