The woes of the airline operators in India don’t appear to be going away. After Jet Airways and Air India, it is now being reported that SpiceJet could be in some sort of trouble too, if the company does not quickly raise some funds. The airline is running on a very thin cash-in-hand situation.
Based on the financial figures released for the quarter ending September 30, 2019, SpiceJet has just Rs 93 crore under ‘cash and cash equivalents’. Just to gain a perspective the figure for ‘cash and cash equivalents’ with InterGlobe Aviation, the company that runs IndiGo is Rs 18,736 crore.
In the first half of the fiscal, SpiceJet reported a loss of Rs 200 crore.
There have been media reports that SpiceJet has been in talks with investors to raise Rs 750 crore, but the SpiceJet management has denied there is any such move.
The risks associated with running low on cash reserves is that any unexpected spike in expenses can put the airline into difficulty. The outgo on account of aviation turbine fuel, for example, could shoot up suddenly.
Observers point out that the sudden closure of operations by Jet Airways should have benefitted an airline like SpiceJet, but on the face of it that does not appear to have been the case. The July-August quarter might have been poor due to the tapering off of demand due to various reasons.
Another issue SpiceJet is saddled with is the grounding of its Boeing 737MAX aircraft. These planes offer saving on operational costs, both in terms of lesser fuel consumption and reduced expenses on their maintenance. These aircraft will be back flying from early next year and hopefully change things for SpiceJet. As per reports, these aircraft have 10% less maintenance costs and 12-15% lesser fuel burn.
And while IndiGo does have more cash in hand, a report in Financial Express states that the airline could see some slowdown in capacity addition and cost pressures due to maintenance after Directorate General of Civil Aviation directed the airline to replace its older A320neos with new planes, when they are delivered. The airline recently announced that it will be inducting 300 Airbus A320neo aircraft.