Home ECONOMY SpiceJet resumes operations, says loan is not a bail out

SpiceJet resumes operations, says loan is not a bail out

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New Delhi, Dec 17:

Budget airline SpiceJet resumed operations on a few routes Wednesday evening following an understanding with the oil marketing companies (OMC) and stated that any bank loan secured by the company will not be a bail out.
Spicejet
The airline’s flights were grounded Wednesday morning after OMCs refused to provide SpiceJet with credit to buy jet fuel over the issue of non-payment of dues.

“SpiceJet apologizes for disruption and pain caused to passengers due to stoppage of fuelling for our flights by the oil companies. We are working to resolve the issue,” said Sanjiv Kapoor, chief operating officer of SpiceJet.

Responding to the criticism of the government bailing out the airline, Kapoor tweeted: “Ministry request to banks to provide loan is not bailout – loan would be guaranteed by promoter. Banks are reluctant to lend to airlines.”

The grounding of SpiceJet’s flight across the country was akin to the Kingfisher-type fiasco which resulted in passengers being stranded at various airports.

The company currently has around 250 departures per day with maximum operations being carried out from Delhi and Mumbai.

The OMCs had placed the budget airline in the cash-and-carry mode under which the company has to make spot payments for buying fuel.

On Tuesday, SpiceJet was given an interim relief, even as its promoters were told to infuse fresh equity.

The ministry had said that it will request OMCs to give credit to the airline for 15 more days. The airline is currently under cash-and-carry mode with OMCs, which mandates that it has to make spot payments for buying fuel.

The daily fuel cost of the airline is about Rs.5 crore, while it has dues totalling Rs.14 crore payable to the OMCs.

The ministry had said that banks may also be approached to give some working capital as loans.

“Based on the assurances by the promoters, the financial institutions would be requested to lend up to Rs.600 crore. This should be paid immediately after securing the long-term investment which will take around eight weeks to consummate,” the ministry said in a statement.

The finance ministry’s approvals have also been sought to permit external commercial borrowing (ECB) as working capital for the airline.

The SpiceJet team had met the civil aviation watchdog Monday to discuss the financial impact on the airline, following the 30-day limit imposed on it for fresh bookings.

The airline had denied any submission having been made on the financial plan.

The company’s top management had also met Civil Aviation Minister Ashok Gajapati Raju Pusapati and his deputy Minister of State for Civil Aviation Mahesh Sharma Monday for relief.

The airline has been asking for more time from oil companies and airport operators to pay their dues.

Meanwhile, the scrip of the beleaguered airline fell by over five percent on the Bombay Stock exchange (BSE) Wednesday to close at Rs.13.15.

The airline recently reported a Rs.310 crore loss for the quarter ended September, down from the Rs.560 crore loss in the corresponding period of last fiscal.

It is now operating only 26 aircraft as against the 35 earlier this year.

Even the airline’s auditors, SR Batliboi & Associates, have doubted its ability to stay afloat. (IANS)