Published: 01st Oct 2024
By: Value Research
Debt-laden SpiceJet may see a change in its fortunes. A U-turn seems to be on the horizon, going by two recent developments. Let’s analyse what can change for the company:
SpiceJet's lessor Carlyle Aviation will convert $30 million of dues into equity at Rs 100 apiece, a 72% premium! It will also write off $40 million and convert $20 million into convertible debentures for its subsidiary. This will reduce SpiceJet's debt by Rs 587 crore from its total debt of Rs 5,376 crore.
Additionally, it recently raised Rs 3,000 crore through a QIP, which will be used to revive its grounded fleet and expand capacity. With this funding, the company is optimistic about returning to profits in 2-3 years.
The company is in the process of settling debts with major lessors like Carlyle and expects to clear remaining dues from other creditors by deploying Rs 750 crore from the QIP proceeds.
Currently, 36 of SpiceJet's 58 aircraft are grounded due to defaults and maintenance issues. The goal is to use most of the QIP proceeds to unground these planes and nearly double the fleet to 40 aircraft by FY25.
If these goals are met, the improved operational capacity and reduced debt, combined with favourable conditions like low fuel prices could help SpiceJet start narrowing its losses.
The competitive landscape is not in favour. SpiceJet’s market share is down from 10.5% in 2021 to just 4%. While IndiGo and Air India dominate the market, with superior customer service and operational efficiency, SpiceJet struggles with weak brand image and service dissatisfaction.
Can these drawbacks materialise and puncture the comeback? They can. For a detailed analysis on how these risks could play out and threaten the airline’s turnaround efforts, read the full story from the link below: