Thursday, December 18, 2014

Thousands Stranded as SpiceJet Comes Close to Shutdown

Some of SpiceJet's Boeing 737-800s stand subject to repossession in the next ten days. (Photo: Boeing)

By Neelam Mathews

December 17, 2014, 1:07 PM
Travelers faced serious disruption at major airports in India on Wednesday when low-fare airline SpiceJet canceled operations for the day as oil companies refused to supply aviation fuel until it paid past dues. A skeleton service started by late evening, however, after India’s civil aviation ministry asked fuel providers to extend credit to the airline for 15 days.
SpiceJet defaults have created a panic reaction as lessors flock to repossess their aircraft “before a situation arises similar to Kingfisher Airlines when aircraft were cannibalized and up to $40 million an aircraft was borne by the lessors to refit aircraft,” one aircraft lessor told AINspeaking on condition of anonymity. Of the airline’s 19 Boeing 737s, 17 remain in operation and five stand subject to repossession in the next ten days. Its fleet of 15 Bombardier Q400s, 12 of which remain in operation on a lease from Export Development of Canada, will likely stay in India longer due to weak demand around the world, the lessor said.
Some observers feel SpiceJet is paying for mistakes made by now bankrupt Kingfisher Airlines with high insurance, leasing costs and a lack of trust by lessors of the Indian market in general, SpiceJet “may be history and breathing time will be short,” according to Amit Mittal, principal of the AeroIntellect consultancy. “People have become cautious after the Kingfisher experience,” he said. “The fallout of this will mean more business for budget IndiGo. The full service startup Vistara will also possibly expand its fleet faster than it had envisaged if SpiceJet goes out of business.”
With high oil prices in the past years, major airlines had reduced the size of their fleets. Air India chairman and managing director Rohit Nandan told AIN that not many extra aircraft are available to add at short notice to fill the gap. “We are sad to hear about SpiceJet,” he said. However, as demand outstrips supply, passengers, for the moment, can expect to see fares rise, unless this trend is mitigated by the now-falling price of oil.

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