India’s low-cost carrier, SpiceJet Ltd, is in dire need of recapitalization to successfully weather the financial storm, industry experts said, media reported on Monday.
According to a report by Livemint, the company needs a capital injection to compete with existing and newly launched airlines.
The company posted huge losses in the April-June period of this quarter with the resignation of its chief financial officer Sanjeev Taneja. From the grounding of the fuel-efficient Boeing 737 MAX in 2019 to the write-off of six planes in August 2022 due to non-payment of donor dues, SpiceJet is witnessing a sense of unrest among its employees as their salaries have not not yet resumed at pre-Covid levels.
According to experts quoted in the LiveMint report, the carrier is confident of resuming full operations once the restrictions are lifted. The budget airline was lucky to secure funding for its survival, according to the report’s analysts.
The company is expected to secure around Rs 225 crore this week under the central government’s Emergency Credit Line Guarantee Scheme (ECLGS) to settle its dues, Trade standard announced September 2.
The airline has been recording losses for four years. In addition, it currently operates less than 50% of flights, following the July 27 decree of the Directorate General of Civil Aviation (DGAC) following a series of incidents.
In 2020, the Center had launched the ECLGS to provide unsecured and government guaranteed loans to businesses affected by the coronavirus pandemic.
Under the ECLGS, a company in the aviation sector can obtain a loan of up to 50% of its total outstanding credit from all credit institutions. However, the amount borrowed by the company cannot exceed Rs 400 crore.
SpiceJet suffered net losses of Rs 316 crore, Rs 934 crore, Rs 998 crore and Rs 1,725 crore in fiscal 2019, 20, 21 and 22, respectively.