09/12/2014 12:53 PM IST | Updated 15/07/2016 8:24 AM IST

Spicejet Hits Massive Turbulence As Operational Woes Mount

RAVEENDRAN via Getty Images
An aircraft of Indian airline Spicejet lands at Indira Gandhi International Airport in New Delhi on September 8, 2012. AFP PHOTO/RAVEENDRAN (Photo credit should read RAVEENDRAN/AFP/GettyImages)

Budget airline Spicejet, owned by billionaire Kalanidhi Maran, appears to be coasting through heavy turbulence as news of operational troubles are reported every day, in a manner reminiscent of the final days of Kingfisher Airlines, which subsequently shut down.

For December, the airline has cancelled 1,861 flights--81 of them just on Monday. The civil aviation regulator has barred the company from accepting bookings for more than a month in advance, and cancelled 183 of its landing and parking slots. The company has also been asked to pay up all salary dues by December 15.

Dues to the Airport Authority of India has been mounting and the agency is now reportedly considering shutting the line of credit.

In a year, the airlines has shrunk its fleet nearly by half, from 41 Boeing 737s, down to 22 now. The airline's cumulative losses stand at Rs434 crore. Maran acquired control of the publicly traded airline in 2010, paying Rs750 crore for a 37% equity stake. The marketcap of the airline currently is Rs941 crore. In March this year, the promoters infused Rs133 crore in equity into the company. But with cumulative losses at Rs434 crore, the company's financial position hasn't turned around.

SpiceJet says comparisons with Kingfisher are exaggerated. But then, the memory of Vijay Mallya's doomed airline is fresh in people's memory. And Spicejet's rapid scaling down and mounting cancellations has raised fears that it will eventually meet the same fate. The company's shares have slid 16% this month compared with the S&P BSE Sensex’s 2% drop.

SpiceJet's financial position is not as bad as Kingfisher, in terms of negative net worth and debt. But it still owes vendors, airports and lessors about Rs1,600 crore. Maran needs to quickly find an answer to one question--where will this loss-making airline find the funds to pay them back? And if the airline can't soar with record low fuel costs, how can it survive even a small spike in it?