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Indian Express
07-08-2025
- Business
- Indian Express
SpiceJet's flight to recovery: Can the airline engineer another turnaround?
In early 2020, SpiceJet was staring at a crisis for survival. Two shocks — one regulatory and the other pandemic-driven — in quick succession pushed the airline to the brink. Even before Covid, challenges had begun to mount. In March 2019, all 13 of SpiceJet's Boeing 737 MAX aircraft were grounded following two fatal crashes that exposed a flight control flaw. With over 100 MAX jets on order, the grounding left the airline dependent on older 737 NG aircraft, which were less fuel-efficient and more expensive to operate. Then came the Covid lockdown in March 2020. Passenger revenue collapsed overnight, while fixed costs, including lease rentals, maintenance, employee salaries, supplier payments, and regulatory dues, stayed. A sharp rise in ATF prices during FY22 further deepened the financial stress for airlines. In FY20, SpiceJet reported a loss of Rs 937 crore, and its net worth turned negative at Rs 1,579.3 crore. To stay afloat, SpiceJet slashed salaries, operated only its oldest jets, and pivoted to cargo via Spice Xpress. The company hauled 76,500 tonnes of critical supplies on 9,930 flights by October 2020, including Vande Bharat flights. While domestic operations resumed in May 2020, subsequent Covid waves in March 2021 and January 2022 delivered fresh blows to air travel demand. The airline's consolidated loss widened to Rs 1,744.3 crore in FY22, and its net worth declined further to Rs –4,288.3 crore. High ATF prices, rupee depreciation, ransomware attacks, and governance lapses compounded the crisis. Disputes with lessors resulted in at least 38 aircraft being grounded. As a result, the fleet shrank from 80 aircraft in FY22 to 41 in FY23. Essentially, repeated lockdowns and low airline traffic led to a 'liquidity crunch', which led to a major part of the fleet remaining on ground. Turning the corner (FY 2022-24) Passenger air traffic in India surged from 105.4 million in FY22 to 190.5 million in FY23, though it remained below its pre-pandemic peak of 202 million in FY20. SpiceJet's revenue increased from Rs 5,171 crore in FY22 to Rs 8,874 crore in FY23, though it reported losses at Rs 1,512.9 crore. In FY 24, the airline recorded a 90% load factor. High load factors are a sign of improving performance, if not profitability. In addition to improving load factors, the airline undertook several restructuring measures to improve balance sheet health and liquidity. These include: SpiceXpress spinoff (Apr 1, 2023): The cargo business was hived off into a separate subsidiary, allowing SpiceJet to deleverage its balance sheet and simultaneously allow SpiceXpress to have a more focused management and strategy. Capital infusion: In September 2023, SpiceJet announced that the promoter (through SpiceJet Healthcare Private Limited) would infuse Rs 500 crore (equity/warrants) at Rs 29.8/share. This included Rs 200 crore infused upfront in the form of equity allotment, while the remaining (warrants amounting to Rs 294 crore) was infused on 14 June 2025. In February 2024, the company raised Rs 636.5 crore from Domestic Institutional Investors (DIIs), family offices and HNIs at Rs 50/share. In September 2024, the company raised Rs 3,000 crore through a QIP (Qualified Institutional Placement) to FIIs and DIIs, including Goldman Sachs (Singapore), Morgan Stanley, and Societe General ODI at Rs 61.6 per share. These capital infusions were utilised to clear past dues and unground the fleet. SpiceJet continues to report operating losses despite significant capital infusion, lessor debt conversion to equity, and payment of statutory dues. However, there has been a decline in the interest expense (primarily towards lessor debt) from Rs 507 crore in FY23 to Rs 291 crore in FY25. Depreciation also declined because of a lower fleet count. PAT of Rs 61 crore (consolidated) is courtesy a gain on settlement of certain lease obligations, resulting in a Rs 538.7 crore non-cash gain reported as 'other income'. The cash flow, however, is anything but positive, and SpiceJet must increase its fleet size to reach operating profitability. However, challenges remain. Despite significant capital raises, lessor settlements, and payment of outstanding dues to suppliers and vendors, the fleet size has reduced from 35 in FY24 to 22 in Q4FY25. According to the company, the reduction in fleet size was due to two main factors: the return of aircraft previously on 'wet lease' — short-term leases that include crew, maintenance, and insurance, but come at a high cost — and delays in the delivery of company-owned engines from Aircraft MROs (Maintenance, Repair & Overhaul), which were originally expected by April 2025. As a result of the delay, the overall fleet size temporarily decreased. However, with over 15 engines, including two received in July 2025, expected to be gradually added back, SpiceJet could soon see a significant increase in its operational fleet. According to the company's Q4FY25 investor presentation, the airline plans to reach 52 operational aircraft by December 2025. Fleet additions will remain a key monitorable. On July 25, SpiceJet also announced the addition of five new Boeing 737 MAX aircraft, expected to join the fleet in October 2025. For SpiceJet, the following sequence of events suggest an improving outlook: Valuation While there is currently no consistent operating profit to base a valuation multiple on, the intent is clear: over Rs 4,000 crore in capital has been infused over the last two years, with promoters contributing Rs 200 crore in FY23 and Rs 294 crore in FY25. SpiceJet has settled almost all of its lessor debt, settled airport charges and other statutory dues, and has paid off salaries to employees. Of the 15 engines expected to be added back to the fleet, it is likely to see a steady flow over the next few quarters. Whether this translates into improving profitability remains to be seen. Note: We have relied on data from and throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information. Rahul Rao has helped conduct financial literacy programmes for over 1,50,000 investors. He has also worked at an AIF, focusing on small and mid-cap opportunities. Disclosure: The writer or his dependents do not hold shares in the securities/stocks/bonds discussed in the article. The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.
Mint
23-05-2025
- Business
- Mint
Twenty years of SpiceJet: The no-frills airline's journey through many highs and lows
SpiceJet marks its 20th anniversary on May 24, 2025. From its modest beginnings in 2005 to becoming a household name in Indian aviation, the airline's journey has been nothing short of turbulent — filled with rapid growth, intense competition, financial turbulence, and resilience. However, the fact that SpiceJet started earlier than IndiGo, and IndiGo is now over 12 times its size, speaks a lot about the missed opportunities of SpiceJet. On the other hand, SpiceJet is one of the two carriers (the other being IndiGo) which has managed to survive as many years with the likes of Air Deccan, Sahara, Jet Airways, Kingfisher Airlines and Go Air not able to sustain the Indian aviation landscape, apart from many other smaller players. SpiceJet took to the skies on May 23, 2005, with its first flight from Delhi to Ahmedabad. The airline was quick to expand and look for routes, both non-stop and one-stop, which were immensely popular. Its catchy tagline, ' set the tone for a bold and energetic brand in the making. It held some prime spots at major airports and offered competitive fares. The airline grew rapidly in the late 2000s, expanding its fleet and adding new routes across India. However, like many carriers in the fiercely competitive Indian aviation sector, SpiceJet faced its share of headwinds — rising fuel costs, regulatory hurdles, and price wars took a toll. In 2010, it changed hands from Ajay Singh to Kalanidhi Maran of the Sun Group. The expansion saw the airline focus on Chennai, move from a single fleet type to dual class, with the Bombardier Q400 turboprops being inducted. The airline was at the cusp of a major expansion, planning expansion with Blue Ocean Strategy. However, a debt-free company in 2011, the airline piled up debt quickly due to rising oil prices and market headwinds, coming to a near standstill in December 2014, grounding its fleet and alarming investors and passengers alike. Ajay Singh returned to the helm as white knight, orchestrating a dramatic turnaround. Under his leadership, the airline renegotiated leases, cut costs, and refocused on profitable routes. SpiceJet began to stabilise and even diversify, venturing into cargo (SpiceXpress) and regional connectivity under the UDAN scheme, which was announced in 2016. The tailwinds looked favourable once more with the airline placing an order for the MAX aircraft with Boeing and being the second in India to take delivery. This would have set the airline on a different course with fleet renewal firmly in place and an MoU with none other than Emirates as a codeshare partner. Its regional arm helped connect underserved Tier-II and Tier-III cities, in alignment with the government's vision for accessible air travel. The fall of Jet Airways was a high point of sorts for the airline, which saw an immediate opportunity to scale back to 2014 levels and go beyond in due course of time. With Jet Airways planes grounded in India, the lessors found a white knight again in the form of SpiceJet, which took 30 of former Jet Airways planes, along with pilots. This was followed by Vistara adding these former Jet Airways planes and crew. It became a win-win situation for everyone, the lessors, the staff and the airports. The government linked slots of Jet Airways to additional capacity, and by the end of 2019, within months of the fall of Jet Airways, the Indian skies were buzzing again with planes still showing remnants of Jet Airways livery and crisscrossing the country. This also coincided with the grounding of MAX after two deadly crashes. What seemed like a masterstroke became the backbreaker for SpiceJet. It clearly was trying to gulp more than it can chew but was the opportunity which was presented. However, less than a year after the fall of Jet Airways and SpiceJet taking as much liability in the form of new planes and additional staff, the pandemic hit which grounded aviation in India and across the world. The airline hardly managed to come out of this hit, with the financials being even worse than what 2014 had in store for the airline. The airline was hit by court cases along with liquidation petitions filed by lessors and others. The airline has recovered partially by monetising SpiceXpress, the cargo arm, and attracting investments worth INR 3,000 crore last year from multiple investors. However, its market share has remained below 5 per cent in a market which has more than doubled since 2014, when it hit its first major setback. New entrants like Akasa Air have managed to have a larger presence at key airports. The newly raised funding has helped the airline retire some debt, but it is still struggling to get the capacity in the air as it had once thought and committed it would. Sustenance has been the first goal for the airline, and it would hope that the base remains strong to build on it without any external shocks this time around.
