SpiceJet says aircraft lessor agrees to withdraw court proceedings

Mumbai: An Irish aircraft leasing company has agreed to withdraw court proceedings and moves to seek deregistration of aircraft against SpiceJet Ltd, India’s second largest low-fare airline said on Monday.

In a filing to the BSE, SpiceJet said it entered a settlement agreement on Monday with lessor Wilmington Trust SP Services (Dublin) Ltd with regard to aircraft operated by the Indian company.

Under the terms of the out-of-court settlement, “the lessor has agreed to withdrawal of court proceedings and deregistration process of aircraft subject to SpiceJet satisfying the terms of settlement”.

SpiceJet had approached the Delhi high court on Monday challenging a 19 March judgement of a single judge of the high court directing the Directorate General of Civil Aviation (DGCA) to deregister six aircraft given on lease by two Irish firms to SpiceJet.

Justice Rajiv Shakdher had also directed the aviation regulator to deal with the issue of re-exporting the aircraft out of the country within two weeks.

In its appeal, SpiceJet has argued that it was a “purely commercial dispute” and the high court should not have exercised its writ jurisdiction in granting relief to the Irish firms. It has also said that the deregistration will “have a cascading effect and gravely injure public interest as thousands of employees, direct and indirect, would lose their jobs and the economy of the country will also suffer”. It also said that it will result in a “collapse” of the turnaround plan of the company. SpiceJet also argued that the order would adversely impact customers who have booked their flights months in advance.

The case will come up again for hearing on 24 March.

SpiceJet said its flight operations are currently normal.

These cases originated in December, when the airline was going through a financial crisis, before a change of ownership and infusion of fresh funds.

Ajay Singh, a co-founder of SpiceJet who exited the airline in 2010, is back in control after buying out the entire 58.46% stake of Kalanithi Maran and Kal Airways Pvt. Ltd on 23 February.

In a statement on Friday, SpiceJet said that in parallel with the court proceedings, discussions have been on with the lessors for an amicable settlement. “The change of ownership and infusion of fresh funding has assured SpiceJet’s future, and our creditors are aware and appreciative that the best outcome for all parties would be a fully revived and healthy SpiceJet, and are working jointly towards that outcome,” the airline said.

As part of the revival plan, SpiceJet is also in the process of adding more aircraft to the fleet. The planned deployment of eight-nine Boeing aircraft starting in April will take its Boeing fleet to 25-26 aircraft in the summer. In addition, SpiceJet owns 15 Bombardier Q400 aircraft.

Singh said the airline expects to settle all dues with the current lessors of Boeing B737 planes. He said the airline had recently paid outstanding lease rentals of $10 million to three lessors from whom it had taken Boeing 737s on lease.

Singh, who is expected to team up with JPMorgan Chase and Co. and a local investor, is planning to invest at least ₹ 1,400 crore in the airline by the end of April. The deal will offer a lifeline to SpiceJet.

On 5 December, the aviation ministry asked SpiceJet, which was raising some of its working capital through advance ticket sales, to stop the sale of tickets more than a month in advance of the travel date. That restriction came after the airline cancelled around 1,800 flights in December, following a reduction in its fleet size, largely owing to financial reasons.

This, along with reports of unpaid salaries, prompted the aviation regulator to act to prevent a repeat of what had happened with Kingfisher Airlines Ltd, the debt-laden airline that was grounded in 2012. However, the curb on advance sales ended up precipitating a crisis by drying up SpiceJet’s source of funds.

In December, the airline briefly grounded its fleet after oil firms refused fuel supplies until it paid its dues. Later, the aviation ministry lifted the restriction on advance bookings.

“SpiceJet will continue to add more aircraft in the second half of the year to take the Boeing fleet up to 34-35 aircraft by the end of the year,” the airline said on Friday.

Apoorva in New Delhi contributed to this story.