SpiceJet is all set to receive a funding of Rs 2,250 crore. In this article, let us take a look on how the airline will use it? Also, we will see if this is a breakthrough for the airline or another lollipop similar to SpiceXpress differentiation?
SpiceJet funding plan
Budgest carrier SpiceJet recently announced that it is receiving a fund infusion of Rs 2,250 crore from 63 entities. The airline will issue equity shares and warrants to these companies. Here is the plan.
The airline will raise funds in 2 phases. In first phase, it will raise Rs 1,591 crore by June 2024. In second phase, it will raise Rs 650 crore by July 2025. Here is the fund allocation of the airline :
- Rs 504 crore has been allocated to pay employee salary dues. This includes the TDS (Tax deducted at source), GST (Goods and services tax) and PF (Provident Fund) dues.
- Rs 400 crore has been allocated to pay dues to its creditors. The airline is fightinf many court cases against aircraft and engine lessors.
- Rs 500 crore allotted for bringing back grounded aircraft back to operational status. This will include fleet upgradation and acquiring new Boeing 737 MAX aircraft. The airline has already started talks with Boeing commercial for resumption of Boeing 737 deliveries. SpiceJet has more than 200 MAX aircraft on order.
- Rs 200 crore has allocated for the Aviation Turbine Fuel (ATF) charges. The airline will use this amount to pay the fuel suppliers.
- Rs 78.5 crore has been allotted for employee related purposes.
- For more corporate purposes, the airline allotted Rs 559 crore.
Out of these Rs 2,250 crore, Rs 1,100 crore comes from Mumbai based Mohapatra couple. Harihara Mohapatra and Preeti Mohapatra will invest Rs 1,100 crore in the airline in return of 21.98 percent equity. SpiceJet Managing Director Ajay Singh stake is likely to down to around 35 percent. The airline will issue 31 million equity shares to 58 companies and 13 million warrants to 5 companies at a price of Rs 50 each.
Genuine investment or Lollipop?
By hearing the words written above regarding SpiceJet funding plan, you should not think that the airline is out of trouble. Remember, when SpiceXpress, the cargo division was separated from SpiceJet, a similar environment was made that this will solve all problems of SpiceJet. But what happened? Nothing. It was a dumb sale and nothing apart from that.
The airline says that it has allocated Rs 500 crore for fleet repairing as well as acquisition of more Boeing 737 MAX aircraft. The market value of a single Boeing 737 MAX exceeds this amount. How will the airline acquire more aircraft? The most it can do is sign more wet lease agreements for increasing capacity temporarily. In the meantime, it can bring grounded aircraft back to operational status.
On top of all this, SpiceJet has expressed interest in the insolvency proceedings of GoFirst Airways. The airline says that it has viable resolution to get GoFirst back to the skies.
For me, this funding is nothing. The airline will pay dues to creditors and nothing else. As it will come in tranches and will go in tranches. I hope that employees get their hard-earned salaries on time.
Source : CNBC-TV18