Delhi HC orders SpiceJet to ground and return 3 engines

HC on Spicejet: The Delhi High Court has directed SpiceJet Ltd to ground three of its engines by Friday and return them to their lessors, Team France 01 SAS and Sunbird France 02 SAS, within 15 days. This order comes as the Ajay Singh-controlled airline faces ongoing financial disputes with its lessors.

The court's directive follows repeated failures by SpiceJet to pay the outstanding amounts owed to the lessors. Last week, the court reprimanded the airline for its inability to meet financial obligations, stressing the importance of adhering to contractual agreements. Despite multiple assurances of payment during the past four hearings, SpiceJet failed to fulfil these commitments, prompting the court to take decisive action.

During the hearing on August 8, the court explored the possibility of SpiceJet's directors providing personal undertakings. These undertakings would ensure that if the airline cannot pay its dues, the directors would personally cover the costs. The court has also requested feedback from the lessors on whether they would accept such an undertaking or prefer to proceed with grounding the engines.

SpiceJet is currently embroiled in legal battles with its lessors over unpaid dues and has received requests for the de-registration of its aircraft by the aviation regulator. The airline's financial troubles have hindered its ability to reintegrate grounded aircraft, leading to a decline in market share, even as competitors like IndiGo and Air India expand their fleets.

In March 2024, SpiceJet reported a cash and cash equivalents balance of Rs 187 crore, alongside a negative cash flow from operations amounting to Rs 613 crore. To stabilise its financial situation, the airline announced plans in late July to raise approximately Rs 3,000 crore ($360 million) through the issuance of securities, including shares. While the specific pricing details have not been disclosed, this fundraising effort is aimed at restoring SpiceJet's operational stability.

Despite these challenges, SpiceJet reported a first-quarter profit of Rs 150 crore ($17.9 million), a 26.7 per cent decrease from the previous year. The airline attributed the decline to a drop in passenger numbers and ongoing legal and financial issues. Additionally, the airline's revenue for the April-June quarter fell by 14.7 per cent to Rs 1,708.24 crore, compared to Rs 2,003.5 crore in the same period last year, as the airline scaled back operations.

Looking ahead, SpiceJet plans to operate 26 per cent fewer weekly flights in the upcoming summer schedule of 2024, from March 31 to October 26. However, the airline emphasised its strong market position, noting that it continues to lead the industry with the highest domestic load factor of 91 per cent.