Ailing SpiceJet Gets New Lease on Life

by Neelam Mathews

 - January 15, 2015, 12:21 PM

Only 17 of 35 Boeing 737-800s delivered to SpiceJet still operate with the ailing carrier. (Photo: Boeing)

The co-founder of Indian budget airline SpiceJet has agreed to take control of the airline as part of an effort to stem the struggling carrier’s losses. Crippled by a fiercely competitive environment, rising costs and burdensome taxes, the airline informed the Bombay Stock Exchange on Thursday that the board had agreed to the proposal of the principal shareholder, Kalanithi Maran, to transfer the ownership, management and control of the company to original promoter Ajay Singh and a consortium consisting of two or three private equity fund companies, including JP Morgan. Singh will hold the controlling stake in the company with 26 percent of the shares.

Under the plan to transfer ownership, SpiceJet, which owes $32 million to the Airports Authority of India, would get an initial infusion of $17 million of the $200 million total investment. The bulk of the financing will come once the stock exchange transaction executes in another three to four weeks, an airline official told AIN on condition of anonymity. “The process is a time-consuming one and compliance is lengthy in listed companies,” he said. “The airline expects to fully restructure its management, become leaner and more focused.”

In the past year, SpiceJet’s fleet of Boeing 737s shrunk from 35 to 17 and only 11 of its 15 Q400s remained in operation as lessors rushed to retrieve their aircraft. Plans call for an increase in the size of the Boeing fleet to 25 once operations return to normal.

“This has come as a blessing in disguise for the carrier,” said the airline official. “Poor management has been a precursor to many airlines’ fall in India…Now with the new owners, inertia will be out of the door, as the processes get lean and mean. Lessons learned from this will be for managements not to micromanage.”