Spicejet Now Has 19 Q400s. Do Owned Planes Set Airline On A Different Course?

(MENAFN- Live Mint) SpiceJet, which is back from the brink again, has been on a settlement spree with its lessors and lenders. As part of its settlement, it has paid INR 763 crore to settle a dispute with Export Development Canada. The airline says that it will lead to a saving of INR 574 crore. This settlement has led to SpiceJet acquiring full ownership of 13 Q400 aircraft. This is in addition to the six such aircraft which were transferred to SpiceJet in April, post settlement with lessor NAC.

The owned aircraft for SpiceJet now goes up to 19 Q400. As of mid-October, data released by regulator DGCA shows that the airline has 23 Q400 aircraft in its fleet. With 19 of these now owned, the Q400 fleet of the airline has the potential to be a game changer. The impact of this is multifold for SpiceJet.

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The airline has long had a negative net worth. Its finances before the fund infusion recently were worse than what it had in December 2014, when it shut operations for a few hours and led to a change in management.

With leased planes, overdue leases and even mandatory regulatory dues not paid; the going was getting tough for SpiceJet. The infusion of over INR 3,000 crore in the last one year and subsequent settlement with lessors in the form of transfer of title means that the airline will have assets to show in its balance sheet. This will have a positive impact and potentially be used to raise more funding in future.

With complete ownership of the planes, SpiceJet is now free from lease rentals and a settlement means this is not a finance lease as well. This means the airline is neither paying a lease rental nor paying the banks for funding this plane. It is free of any encumbrances. This sets the airline on a course where very few airlines in India have been, since most of the industry focuses on sale and lease-back to raise cash and not have assets on the balance sheet.

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SpiceJet has been one of the laggards when it comes to RCS-UDAN flight operationalisation and continuation. There have been many cases where the airline started services and then left, largely as it battled a dwindling fleet. Most, if not all, of RCS-UDAN routes of SpiceJet are scheduled on the Q400 fleet. As more Q400s get operational, the airline has already launched some RCS-UDAN routes and reinstating others.

The RCS-UDAN routes come with multiple benefits. From having a monopoly in most cases to the government providing Viability Gap Funding along with a waiver of certain charges at airports, the three-year exclusivity period helps project a certain revenue for the airline - which may be difficult in other commercial routes.

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The airline has in the past operated wet-leased operations for flybig on the Delhi-Shillong route, where flybig was the airline which won the bids but did not have planes to operate the long route and instead used Spicejet aircraft to operate. With the Q400 out of production and SpiceJet having a healthy count now on its own books, SpiceJet could wet-lease out the planes along with engineering services to carriers on a short-term, temporary or long-term basis. This will ensure a steady flow of revenue coming in. This would be coming a full circle for an airline which has been relying on wet-leased aircraft to operate its flights.

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