Home / Companies / SpiceJet barred from advance bookings beyond one month

New Delhi/Mumbai: India’s aviation regulator on Friday stopped loss-making airline SpiceJet Ltd from selling advance tickets beyond a month and asked it to explain how it will settle its dues of over 1,600 crore in a time-bound manner.

“We have been very patient with them (SpiceJet), but the concerns and complaints have gone overboard now," a top government official said on condition of anonymity.

The airline, controlled by media baron Kalanithi Maran, has been offering tickets as much as a year in advance, but has been cancelling many flights close to the date of flying, which led to the Directorate General of Civil Aviation (DGCA) barring it from selling tickets beyond a month before a flight.

“The decision to ban the airline from booking tickets beyond one month is not helpful," SpiceJet’s chief operating officer Sanjiv Kapoor said. “It will have an adverse impact on our revenue bookings. We are going to discuss with DGCA about this issue."

The firm has to return money to all customers whose flights have been cancelled within a month, the regulator has said.

The airline has also been asked to explain within a fortnight how it plans to pay dues of more than 1,600 crore to its vendors, said the official cited earlier. SpiceJet has to submit details of how many planes it can operate, by Monday.

DGCA has cancelled nearly 180 flight slots of the airline.

Kapoor said the withdrawal of slots was a natural fallout of shrinking the airline’s fleet by about a third.

“We are in a transition phase. We are going to operate a smaller airline. Instead of operating 35 Boeing 737 planes, we are going operate 22-24," he said. “If we are not operating planes, what is the point in holding slots?"

SpiceJet, which was operating a fleet of 57 aircraft at the start of the year, is now down to 37, as many lessors have taken their aircraft back and more are calling upon DGCA for repossession, the government official said.

The airline has 22 Boeing planes and 15 aircraft made by Bombardier Inc. of Canada. The Canadian high commission in New Delhi is concerned about the financing of the Bombardier planes, said the official.

DGCA has asked SpiceJet to pay pending salaries by 15 December and subsequently by the 7th of each month.

Kapoor said 85% of salaries are being paid. “Remaining salary for 15%, constituting highly paid staff, would be cleared in the next few days," he said.

“We are also increasing safety checks on all their aircraft," the government official said, adding that the regulator will monitor the airline to make sure it does not ask its pilots and cabin crew to work more than the permitted number of hours in wake of an exodus from the firm.

The company’s total liabilities exceeded its total assets by 1,459.7 crore on 30 September, the airline’s auditor SR Batliboi and Associates has said.

“These conditions indicate the existence of a material uncertainty that may cast significant doubt about the company’s ability to continue as a going concern," the auditor said in a company filing to BSE.

State-owned Airports Authority of India has said in an email that it is revoking its credit line to SpiceJet and that the airline will have to pay for its services every time it uses them (which is every time a plane takes off or lands). Kapoor said on Twitter on Friday that the issue with the country’s largest airport operator has been resolved.

“You must appreciate that the pro-active stance of DG (director general) Prabhat Kumar and civil aviation minister Ashok Gajapathi Raju will help passengers, should SpiceJet be unable to sustain its operations. The onus is on SpiceJet management now to either ensure that funds are available for normal operations or be realistic in its assessment of actual finances and not be over-optimistic that someone someday will extend a credit line to the company," said Jitender Bhargava, former executive director at state-run Air India Ltd. “DGCA perhaps has learnt its lessons from the Kingfisher experience."

Kingfisher Airlines Ltd was grounded in October 2012 amid employee unrest over unpaid salaries. The airline had accumulated losses of 16,023.46 crore as of 31 March 2013 and its net worth was a negative 12,919.82 crore. Launched in 2005, the airline never made a profit.

SpiceJet’s stock has been declining since its credit facility was revoked. It slumped as much as 13.78% on Friday to close at 15.95 on BSE, on a day the benchmark Sensex shed 0.37% to 28,458.10 points.

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