With an estimated daily loss of Rs 2.75 crore, low-cost carrier SpiceJet is in big trouble. The airline’s cumulative losses have piled up to Rs 2,189 crore and the Kalanithi Maran-owned carrier desperately needs a big dose of capital.
The airline is also in a spot of bother with the Directorate General of Civil Aviation (DGCA) having initiated an engineering audit on it — the DGCA had reportedly discovered that the carrier wasn’t able to provide equipment for some flights and is checking to see if it has enough spares.
The airline has lost 50 basis points (bps) in market share over the past year but, in absolute terms, its share has increased from 17.8% in March to 19% in June, making it once again the number two airline in the home market. That’s despite a reduction in fleet and capacity deployed during the April-June period. With a load factor of 81.4% in June, SpiceJet also recorded the highest increase in loads for the period March-June 2014. However, much should not be read into the improved load factor since it is largely a result of heavy disounts even in the busy season, on top of a reduced fleet. By offering heavy discounts on tickets, the carrier is able to get cash, something it needs badly.
Indeed, the airline is expected to report a loss for the three months to June, on the back of a Rs 1,003-crore loss last year, a five-fold jump over that in the previous fiscal. The company’s net worth is now a negative Rs 1,020 crore while net debt stands at Rs 1,511.23 crore.
To be fair, Maran has invested around Rs 545.75 crore since 2010, when he bought 37.7% in the company. Today, his stake stands at 52.13% since he has bought 5% every year, the maximum permitted under Sebi regulations. However, that hasn’t been enough and while there has been talk of a foreign investor being brought in, no deal has materialised yet.
Kapil Kaul of consulting firm CAPA feels the carrier requires a minimum $250 million to take care of some of the losses, and more will be needed to expand operations. With AirAsia and Tata-SIA coming in and six more airlines expected to start flying soon it’s critical, he says, that SpiceJet raises money in the next 1-3 months. “If not, the airline's operations could get