After Go First, SpiceJet fights insolvency fears. Why this is bad news for Indian flyers?

This is the second time in as many years that SpiceJet is facing existential worries


After Go First, will it be SpiceJet second? Silly puns apart, the woes befalling India’s airliners and all that turbulence on the ground does not augur well for a happy journey, as far as the Indian domestic passenger is concerned.

While it was its own promoters, the Wadias, who have taken Go First to insolvency court, fellow budget carrier SpiceJet is facing rebellion from its creditors, who had filed a case for it to be declared insolvent. The National Company Law Tribunal (NCLT) took cognisance of a plea by Ireland-based aircraft lessor Aircastle on Monday by issuing notice to the Gurugram-based airline.

The plea is based on SpiceJet not paying dues for leasing four Boeing 737 aircraft from Aircastle. The court issued notice to SpiceJet, posting the matter for hearing for next Wednesday. 

SpiceJet, promoted by entrepreneur and ruling party confidante Ajay Singh, meanwhile acted as if it was business as usual, arguing that there was “no adverse ruling against SpiceJet” and that “notice was issued in normal course.” A statement issued by the airline said, “The court has recognised the fact that parties (SpiceJet and Aircastle) are under settlement discussions and they can continue to pursue the same.”

This is the second time in as many years that SpiceJet is facing existential worries in a court of law. After a case by Credit Suisse AG on behalf of SR Technics, a global maintenance, repair and overhaul (MRO in short in aviation parlance) service provider for not paying up dues amounting to $24 million, the Madras High Court had ordered winding up of the airline back in December 2021. The airline just about managed to escape the noose following appeals.

Of course, SpiceJet may prove itself to be the proverbial cat with nine lives. Its history itself is an unending saga of surviving one crisis after another, from Singh being forced to sell off the airline he founded to the Marans in the 2000s, buying it back from near-doom under the Marans around 2014, its entire Boeing 737 Max fleet grounded following global mishaps in 2019, the pandemic shutting down all operations, planes being grounded on safety issues and now, to unending creditor woes. 

After a recent hiving off of its profitable cargo business as well as a conversion of debt into equity with Miami’s Carlyle Aviation, the airline is now actually in a better position than it ever has been for many many years. The hiving off of SpiceXpress had gained the loss-making airline Rs 2,555 crore through the issuance of securities that are a mix of equity shares and compulsorily convertible debentures.

“It is the DNA of SpiceJet: we refuse to die,” Singh had said at a recent aviation summit in Delhi.

Which may be just as well, because after Go First stopped flying, for all practical purposes, the Indian aviation scene just cannot afford another folding up. As such the trail is long — with one estimate saying at least one airline has folded up every year since the Indian skies were liberalised in the early nineties. Kingfisher and Jet Airways are only just the best known amongst these. 

Now, the worry is over the future of affordable air travel in the country — once Tata completes its mergers of low-cost operator AirAsia India into Air India Express and full-service carrier Vistara into Air India, the number of pan-Indian domestic operators will reduce to just four airlines — Indigo, Air India, SpiceJet and recent new entrant Akasa. 

It remains to be seen if the new avatar of Air India Express, after budget domestic carrier AirAsia India is assimilated into it, will operate as a domestic low-cost airline, since the present version operates budget flights from Indian cities to the Gulf countries only. But AirAsia India, for whatever it is worth, held a market share of 7.3 per cent in the January-March period of this year, and it is unlikely that Tata will forfeit that to a rival by not having a budget domestic alternative to its full-service flagship.

Any which way, with Indigo at nearly 60 per cent market share and Air India’s group airlines at around 25 per cent (calculated based on market share of Air India, Vistara and AirAsia India together), the market is already as good as a duopoly. Which in itself doesn’t sound ‘bon voyage’ to the average Indian hoping for competitive, and affordable, travel in the skies. Any further calumny befalling even one of the smaller players, then, would be unthinkable.

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