SpiceJet chief financial officer Kiran Koteshwar.
SpiceJet chief financial officer Kiran Koteshwar.

SpiceJet will look for options if 737 Max issue isn’t resolved: CFO Kiran Koteshwar

  • Airline to wait for another 8 months before taking a call on new purchases, says CFO
  • The 737 Max planes are unlikely to be ready to carry passengers again until 2020

MUMBAI : SpiceJet Ltd, whose 13 Boeing Co. 737 Max aircraft are grounded since March after fatal crashes involving the aircraft in two separate occasions, is considering placing order of different aircraft if the situation doesn’t resolve in near future, the airline’s chief financial officer Kiran Koteshwar said.

SpiceJet, one of the world’s biggest customers for the MAX 8 has orders for 155 aircraft with purchase rights for 50 additional MAX 8 and wide-body aircraft. The airline has taken delivery of 13 737 MAX 8 planes, considered to be more fuel-efficient than its predecessors. All those planes currently stand grounded.

While Boeing has informed SpiceJet that deliveries of the remaining planes will take place from October-December, this looks unlikely as reports indicate that the grounding could stretch at least till early next year.

The 737 MAX planes are unlikely to be ready to carry passengers again until 2020 because of the time it will take to fix flight-control software and complete other steps, even as the company strives to get its jet back into service this year, The Wall Street Journal (WSJ) reported in July citing government and industry sources.

“The Boeing company has informed us that the resumption of deliveries will happen by Q3, FY20 (Oct-Dec 2019)," Koteshwar said.

“As an organization, we can’t keep endlessly waiting. I think our threshold will be another six to eight months, and if there is a real uncertainty surrounding the situation (deliveries), we will take up more aircraft from the secondary market," Koteshwar said. “For the longer term, we will have to look at a different aircraft type."

Koteshwar did not rule out the possibility of SpiceJet considering a different aircraft fleet, other than Boeing, if 737 MAX planes are grounded for a prolonged period.

SpiceJet had a fleet of 107 planes as of June 30. It included 73 Boeing 737 Next Generation, 31 Bombardier Q400s and three Boeing 737 freighter aircraft.

SpiceJet’s much larger rival IndiGo operates an all-Airbus fleet including A320neo, which are competitors to the 737 MAX planes.

“We definitely know that we will be compensated (from Boeing). But, our focus is to get aircraft to increase capacity and save costs," Koteshwar said. Last week, SpiceJet reported a standalone net profit of 261.7of crore in the June quarter from a loss of 38.1 crore in the same period of the previous fiscal year.

The profits were driven by other income, including reimbursements of 114.1 crore from Boeing for the revenue loss due to the grounding of 737 MAX aircraft. The yield rise was also aided by higher passenger traffic post the grounding of Jet Airways, besides expanding its fleet size to cater to more routes and passengers.

“If SpiceJet were to operate only Boeing NGs and Q400s during Q1, we would have made profit of over 251 crore," Koteshwar said.

“Our MAX fleet remains grounded and the company continues to incur expenses on this," he added.

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