SpiceJet insolvency row: DGCA’s early warnings reveal brewing trouble

As the SpiceJet bankruptcy case accelerates, the Directorate General of Civil Aviation (DGCA) has signaled a long overdue problem for the airline giant.

 

Last year itself, the Directorate General of Civil Aviation warned the airline after noticing several anomalies regarding its services.

“The DGCA’s financial assessment revealed that SpiceJet operates on cash and carry and approved suppliers/vendors are not paid on a regular basis resulting in spare parts shortages and frequent Minimum Equipment List (MEL) recalls… Concluded SpiceJet failed to Establishing a safe, efficient and reliable air transport service”, under the order of 2022.

The aviation watchdog has also imposed some restrictions on the airline.

“In light of the findings of numerous checks, inspections and response to the Offer Cause Notice in order to continue to provide safe and reliable air transport service, the number of departures on SpiceJet is hereby restricted to 50% of the number of approved departures in the summer eight-day schedule weeks as of (July 27, 2022).Any increase in the number of departing flights exceeding 50% of the number of approved flights according to the summer schedule 2022, during this period, shall be subject to the airline’s proof to the satisfaction of the Directorate General of Civil Aviation that it has sufficient technical support and financial resources To carry out this enhanced capacity safely and effectively,” said the order issued by the Directorate General of Civil Aviation (DGCA) Manish Kumar.

In the nine months period ended 31st December 2022, the company recorded a significant loss of Rs. 1,514 crore. As of December 31, his net worth has stabilized at negative ₹5,801 crore.

However, the low-cost airline has categorically stated that it has absolutely no plans to file for bankruptcy.

“We want to note any speculation that may have arisen due to another airline filing. The airline is very focused on its business and remains in active conversations with investors to raise funds,” the airline said.

SpiceJet is facing bankruptcy proceedings as Ireland-based Aircastle Ltd has moved NCLT’s flagship seat to launch a bankruptcy process against the airline.

Amid the insolvency, it also announced that the airline had also begun the process of reviving its ground fleet with the $50 million the company received from the Government’s Emergency Credit Line Guarantee Scheme (ECLGS) and internal cash benefits.

According to SpiceJet Chairman and Managing Director, Ajay Singh, there is absolutely no question of filing for bankruptcy.

“Any rumor regarding this is completely unfounded. We are very focused on reviving our grounded fleet and getting more and more aircraft back into the air. Work on this front has already begun and the company is using our $50 million ECLGS money and our own cash.” .

“We have a wonderful relationship with all of our partners. Our landlords have supported us through thick and thin and continue to do so and we are grateful for their support and trust.”

SpiceJet earlier announced plans to revive 25 aircraft on the ground which will help them take advantage of and make the most of the upcoming peak travel season.

Agreeing to hear the lessor’s plea, a two-member panel of the NCLT issued a notice to the airline. The bench panel, chaired by NCLT Chairman Ramalingam Sudhakar, has directed SpiceJet to attend the hearing on the following date.

Alleging default in receivables, Aircastle sought to initiate corporate bankruptcy proceedings against SpiceJet.

A SpiceJet spokesperson commented that the notice was issued routinely in relation to the Aircastle matter.

The spokesperson said: “In the Aircastle case, the notice was issued normally. There was no adverse judgment against SpiceJet. The court has acknowledged the fact that the parties are in settlement discussions and can continue to pursue the same,” the spokesperson said.

SpiceJet’s financial challenges received significant attention, with the company’s auditor repeatedly expressing concerns about its ability to continue operations due to significant liabilities.

In the domestic market, SpiceJet currently owns 6.9 percent of the shares, which indicates its position among other airlines.

(Shekhar Singh can be contacted at [email protected])

– Jans

ssh/bg