Airline SpiceJet Is It In Trouble? SpiceJet faces another insolvency plea from operational creditor

Based in Ireland, ELF is the world's leading independent engine financing and leasing company and claimed a payment default of over $12 million (around Rs 100 crore).

The National Company Law Tribunal (NCLT) on Monday issued notice to  SpiceJet over the plea filed by one of its operational creditors.

A two-member NCLT bench, comprising Mahendra Khandelwal and Sanjeev Tanjan, has directed Spicejet to file a reply and list the matter for the next hearing on November 14.

SpiceJet is already facing several insolvency petitions from creditors, including Willis Lease, Aircastle Ireland, Wilmington, and Celestial Aviation at NCLT and the appellate tribunal NCLAT.

The latest petition is by Techjockey Infotech, an operational creditor, filed under section 9 of the Insolvency & Bankruptcy Code, through Karanjawala & Co.

Techjockey Infotech claimed a default of nearly Rs 1.2 crore owed by SpiceJet against software services availed by them and requested to initiate a corporate insolvency resolution process (CIRP) against the air carrier.

It contended that its debt has been acknowledged by SpiceJet, though it has not been yet complied with.

Hope for SpiceJet floats on a bright sectoral outlook

The recapitalization, its chairman and managing director Ajay Singh has told ET in an interview, is not only important for the company but also for India’s aviation sector, which is turning into a duopoly between IndiGo and the Air India group. “The sector has a lot of space. What is important is that we don’t allow a duopoly to be created and that it remains a competitive market, where customers have choice,” he said.

“We have the advantage of a market where demand is stronger and yields are better than ever before, (apart from) a benign fuel (price) environment,” he said.

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Will SpiceJet's burden of troubles ease?

SpiceJet's market share has been steadily shrinking, dropping from 5.6% in January 2023 to 2.3% in August, down from 10.5% in 2021. The airline has faced financial difficulties, including defaults on lease payments, leading to legal action by aircraft lessors. Despite these challenges, SpiceJet is telling investors it can turn things around with fundraising efforts to unground planes and expand its fleet.

The airline aims to increase its fleet to 100 aircraft by 2026, with plans to induct 36 grounded planes and take short-term wet leases during high-demand periods. CMD Ajay Singh said the airline has infrastructure, slots, and traffic rights ready for expansion, despite recent setbacks.

SpiceJet's fleet has shrunk from 74 in 2019 to 28 in 2024, and the airline owes around Rs 3,700 crore to lessors and Rs 650 crore in statutory dues. Operational issues worsened recently, with unpaid airport dues causing flight cancellations in Dubai. The DGCA placed SpiceJet under enhanced surveillance, and the airline temporarily furloughed 150 cabin crew members.

A recent relief came when one of SpiceJet’s largest lessors, Carlyle, agreed to convert up to $50 million of dues into equity and restructure obligations. Carlyle will also consider investing in SpiceXpress, SpiceJet's cargo division.

Both Wilmington Trust and Willis Lease Finance have moved the National Company Law Appellate Tribunal (NCLAT) challenging the dismissal of their insolvency plea by NCLT.