Delhi High Court upholds order to ground SpiceJet planes with leased engines

  • The original order, issued by a single judge on 14 August, required SpiceJet to ground two planes by 16 August and return the engines to the lessors for inspection within 15 days. SpiceJet immediately sought a stay on the order, which a division bench has now rejected.

Krishna Yadav
Published11 Sep 2024, 01:52 PM IST
The airline must now ground the planes with the leased engines, but can approach the Supreme Court for relief.
The airline must now ground the planes with the leased engines, but can approach the Supreme Court for relief.

A division bench of the Delhi High Court division bench has dismissed SpiceJet's plea to overturn a single-bench order that mandated the grounding of two planes with engines leased from Team France 01 SAS and Sunbird France 02 SAS.

The division bench, led by Justice Rajiv Shakdher, rejected SpiceJet’s contention on Wednesday, saying it did not wish to interfere with the single-bench order, and asked both parties to seek a settlement instead.

The airline must now ground the planes with the leased engines, but can approach the Supreme Court for relief. The grounding of these planes will increase the burden on the cash-strapped airline. SpiceJet said in court that it operates a fleet of 21 aircraft and that grounding the two planes would disrupt its operations.

Also read | SpiceJet’s path to recovery: A tough, long climb to reclaim market share

The original order, issued on 14 August, required SpiceJet to ground the planes by 16 August and return the engines for inspection within 15 days. SpiceJet challenged the order immediately and sought a stay, which the division bench has now rejected.

The high court had previously rebuked the airline, with Justice Shakdher remarking, "You are using someone else’s property, and you can’t use it without paying the rent. He’s (the lessor) in the business of letting out that property. Which court allows you to use property without paying?"

The court also expressed scepticism about the airline’s assurances to the lessors, noting that if SpiceJet had the financial means to meet its commitments, it would not be defending itself in court. The court also highlighted the airline’s broader financial struggles, including its failure to pay employees.

Also read: The vexing problem of delayed airline refunds may finally get fixed. The tools already exist.

During the hearing, SpiceJet said it was one of the few remaining airlines in India and was struggling to remain operational amid a challenging environment. It said it was making efforts to meet its obligations. The airline detailed a bona fide offer, which included securities and a pledge of shares from the directors to cover the outstanding dues. It proposed securing payments with encumbered aircraft or shares, with an obligation to top these up in case the stock fell. The airline also committed to continuing its weekly payments of $160,000 and monthly installments of $1.2 million.

Plan to raise 3,000 crore 

SpiceJet also said it planned to raise 3,000 crore through a qualified institutional placement (QIP) by 30 September, and pledged to use 4.9 crore from this to settle its dues by the end of September. However, the lessors rejected this offer and expressed frustration over the airline’s failure to make payments since December 2023 and its questionable financial stability.

Court filings revealed that Team France 01 SAS and Sunbird France 02 SAS initiated legal action against SpiceJet in December 2023, citing unpaid dues exceeding $20 million. While SpiceJet has managed to pay $8.36 million towards these claims, it still owes them $9.41 million as of 12 August.

The airline's finances remain dire. It reported a consolidated net profit of 158.2 crore for the June quarter, a 20% decline from 197.6 crore in the same quarter last year. Total income fell by 8.3% to 2,077.8 crore, while expenses decreased by more than 7% to 1,919.6 crore.

Also read: AI Express, Akasa Air rip premium seats even as no-frills IndiGo adds business class

SpiceJet’s total liabilities stood at approximately 11,252 crore at the end of June, down from 11,690.7 crore at the end of March and 12,420.2 crore at the end of December 2023. The airline also now operates under the Directorate General of Civil Aviation’s (DGCA) enhanced surveillance due to the cancellation of flights and financial stress.

In response to these financial challenges, chairman and managing director Ajay Singh plans to reduce his stake in the airline by more than 10% to raise around 3,000 crore. Despite this dilution, he is expected to remain the largest shareholder, with his stake expected to drop to 30-35% after the fundraising.

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First Published:11 Sep 2024, 01:52 PM IST
Business NewsCompaniesNewsDelhi High Court upholds order to ground SpiceJet planes with leased engines

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