SpiceJet plans to revive 25 grounded aircraft as Go First goes bankrupt
SpiceJet, the Indian budget carrier, is set to revive 25 grounded aircraft with the help of a Rs 400 crore credit line from the government. The plan comes as Go First, another airline, filed for bankruptcy on Tuesday, creating a void in the market.
The funding for the aircraft’s revival will come from the government’s Emergency Credit Line Guarantee Scheme (ECLGS) and better cash accruals. The airline has already raised around Rs 400 crore towards this effort.
“We are meticulously working towards getting our grounded fleet back in the air soon. “Chairman and MD of SpiceJet, Ajay Singh, said the airline will utilize the majority of the ECLGS funding received for this purpose, which will help them capitalize on the upcoming peak travel season.”
SpiceJet
The day’s high for SpiceJet shares reached 33.25, showing a 4.2% increase in trading.
SpiceJet’s ‘reconstruction and revival’ plan received approval from the Civil Aviation Ministry in January. In a filing to the Bombay Stock Exchange, the airline stated, “The company has on January 22, 2015, received the approval of the competent authority, the Ministry of Civil Aviation, Government of India, for the ‘scheme of reconstruction and revival for the takeover of ownership, management, and control of SpiceJet Ltd’ by Ajay Singh in accordance with the application made by the company.”
Therefore, to revive the ailing carrier, SpiceJet’s board approved a proposal for the transfer of ownership, management, and control from promoter Kalanithi Maran to the original founder, Ajay Singh. The Ministry gave initial approval to the plan, and they have now referred it to the Securities and Exchange Board of India (SEBI) to determine if the Rs 1,500 crore capitalization by the new promoters triggers an open offer, as confirmed by sources.
Go First, which is owned by the Wadia group, announced on Tuesday that it has applied for insolvency resolution as it can no longer fulfill its financial obligations. The airline has also attributed the grounding of half its fleet to the “faulty engines” of US company Pratt & Whitney. CEO Kaushik Khona confirmed that Go First has filed for voluntary insolvency resolution proceedings before the National Company Law Tribunal (NCLT).
Furthermore, the airline had previously declared that it will halt all flights for a three-day period from May 3 to May 5.
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