Ex-promoter Ajay Singh to the rescue: Here's what SpiceJet needs to survive

After teetering on the brink of collapse, it appears that beleaguered carrier SpiceJet does indeed have a silver lining: slew of media reports have pointed to co-founder and former promoter Ajay Singh as a white knight who may step in to infuse funds.

After years of losses and a mounting debt burden, the company’s existing promoter, Sun Group’s Kalanithi Maran, appears to have thrown in the towel.

The host of troubles SpiceJet has encountered - delayed employee salaries, not enough cash to buy fuel and grounding of several flights - in the past few weeks has made it clear that it needs funds. And needs them fast.

If Singh is indeed keen to pick up stake in the firm, here’s what he needs to do.

One, bring in big money. With the kind of dues it owes to oil firms and airport operators, not counting delayed fresh infusion of capital is required. Consulting firm CAPA recently said Spice immediately needs to Rs 1,500 crore to survive. But the figure would likely need to be revised sharply higher in light of the airliner’s fast-dwindling fortunes.

More from Corporate

Maha: Court orders Rs 30L compensation for parents after youth dies in road accident Ashleigh Barty comes from set down to beat Coco Gauff in Australian Open lead-up

Singh, along with ’two blue-chip investors’, have been reported to be close to investing Rs 1,200 crore. This would help the new promoters buy equity (SpiceJet’s total market cap is about Rs 900 crore) as well as service current debts.

Two, after bringing in big money, Singh has go out and create an impression that the airline is backed by strong hands and the new promoters are in for the long haul. The ‘bluechip investors’, while their names are not yet known, have likely been brought in for this purpose.

After all, like banks, airlines too work on the perception of confidence and fear could itself bring it down: if customers start fearing a carrier is about to fail, they will stop booking tickets with it, which could create or hasten its demise.

Three, the new investors could bargain with existing promoter Maran, who by now must be looking to sell his stake, and get him to put down some of his own money before he is allowed to head for the exit. This would also ensure that Singh and co’s infusion do not go to partly fund Maran’s exit and is instead put towards the airline’s revival.

Four, Singh will also need to work his connections within the BJP - he was a crucial member of the party’s election army and came up with the ‘Abki baar Modi sarkaar’ tagline - to make sure the government goes easy on the airline in the interim if not outright it, as indications are it is already doing so.

And five, start with restructuring the firm in a big way. It must be remembered that under Singh, SpiceJet enjoyed a steady run, raking up strong growth and a high market share (the latter it still does, but only thanks to perilous pricing strategy it unveiled this year to stay afloat) apart from profits and a positive net worth.

Along the way, the firm lost its way and strayed away from the low-cost model: recruiting different classes of aircraft fleet and venturing into a number of unprofitable routes. The recent fall in crude prices would serve as a good time to start, with low fuel prices providing some cushion and helping it to start afresh.

But it is clear that Singh’s coming back at the helm is likely the only way it would survive.