Wednesday, December 17, 2014

Floundering SpiceJet gets AI treatment

After seeing many airlines collapse in the absence of a comprehensive US-like Bankruptcy Protection law in the country, the government, for the first time, seems to be intervening in a systematic manner to save the floundering budget carrier SpiceJet Ltd.

At least, it seems to have made a beginning in the same way with the ministry of civil aviation announcing on Tuesday steps it would be taking “to keep SpiceJet from shutting down”, and for the larger good of the aviation sector.

The ministry said the airline has to give commitment of increasing sufficient appropriate capital within a short period of time. At the same time, it would ask the state-owned oil firms and airport operators to give credit of up to 15 days. With a daily jet fuel off-take of SpiceJet at about Rs 5 crore, it would be Rs 75 crore. According to the ministry, the airline’s pending dues was only Rs 14 crore as on December 15.

“Indian banks may be requested to give some working capital loan based on the assurances of the promoter,” the statement of the ministry said.

It has estimated banks or financial institutions could lend up to Rs 600 crore backed on a personal guarantee from the SpiceJet chairman Kalanithi Maran, with a rider that it would be paid immediately after securing the long-term investment, which is expected take around eight weeks.

To help the airlines tackle its working capital crunch, the finance ministry would be requested to allow “External Commercial Borrowing (ECB) for working capital as special dispensation as was done in the 2012 when a similar crisis had arisen in the aviation sector”.

Lastly, ministry would request the directorate general of civil aviation (DGCA) to open up the bookings of SpiceJet up to March 31.
17/12/14 Praveena Sharama/Daily News & Analysis
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