SpiceJet, which had 13 Boeing 737 Max jets in its fleet when they were grounded worldwide, has added ₹860 crore as other income from compensation and related foreign exchange gains in the past five quarters, the company said
SpiceJet Ltd., one of the world’s biggest customers for Boeing Co.’s now-grounded 737 Max jets, said an interim offer of compensation from the US planemaker is higher than what the Indian budget carrier recognized earlier.
SpiceJet, India’s second biggest airline, has been using an unusual accounting method to book income on expected compensation from Boeing in the past few quarters. SpiceJet, which had 13 Boeing 737 Max jets in its fleet when they were grounded worldwide, has added ₹860 crore ($117 million) as other income from compensation and related foreign exchange gains in the past five quarters, the company said.
Based on current advanced discussions and an interim offer from Boeing, “which is higher than the amount recognized by the company," SpiceJet is confident of collecting that amount, it said in its quarterly earnings statement to stock exchanges. However, its auditors SR Batliboi & Associates, cautioned in a report posted on stock exchanges that “there is no virtual certainty to recognize such other income and related receivable."
SpiceJet’s comments may provide some insight into the costs Boeing may incur for compensating carriers worldwide over lost revenue, which is expected to run into several billions of dollars. The 737 Max, which was idled last year following two deadly crashes, is now under review by the US Federal Aviation Administration and could return to service before the end of this year.
The airline posted a net loss of ₹593 crore for the three months ended June 30, compared with a profit of ₹262 crore a year earlier, as months of a nationwide lockdown destroyed demand for air travel in the South Asian nation
SpiceJet was the only Indian airline with a dedicated freighter fleet during the quarter. That proved a saving grace, with those planes transporting about 50,000 tonnes of cargo on more than 7,000 flights since the lockdown. Cargo helped cushion SpiceJet’s losses because the government allowed freight operations to continue even during India’s lockdown, one of the world’s strictest
The no-frills airline has also diversified beyond its core product during the pandemic, leasing and chartering out widebody aircraft to cities including London and Toronto as demand for flying stranded people back from one country to another skyrocketed. It’s also introduced a portable ventilation device and a fingertip pulse oximeter to make some money on the side
The airline, which was temporarily grounded in 2014 after running out of cash, has made a comeback under co-founder Ajay Singh, who returned to the company in 2015. However, it’s now among the most likely in the world to go bankrupt without any fresh infusion of funds, according to a Bloomberg analysis
SpiceJet shares rose 0.3% Tuesday in Mumbai, paring declines this year to 52.5%.