Rs 1,500 cr not enough for SpiceJet: Ajay Singh may bank on trusted insiders

New Delhi: Is the Rs 1500 crore fund infusion by Ajay Singh enough to save SpiceJet? With euphoria over Singh’s rescue act for the cash-strapped airline waning, airline insiders and analysts have begun wondering if this amount would at all suffice. A source close to developments at SpiceJet pointed out that this is roughly the amount of liabilities to vendors and other stakeholders. This means stakeholders may not all be paid off immediately and instead contracts would have to be re-negotiated. And the airline may have to depend of its own bookings to generate working capital. The DGCA has already lifted the earlier ban beyond March and now, SpiceJet can do forward bookings. Then, there has been a persistent buzz about the new owners, Ajay Singh and his band of investors, making sweeping management changes to steer the airline out of its current morass. These changes may not be immediate but will happen never the less. A source said an airline veteran, who has worked with Singh in his earlier stint which ended in 2010 when he sold off his stake to the Marans, may be elevated to head operations. This person has been in various lead roles in the airline and is well versed not only with the financial details of SpiceJet but also of each of its contracts with vendors. “He is a veteran who has seen the airline grow and then come to the brink of closure. Feelers have been given, it is possible that the new owners make him the CEO or give him another lead role in managing operations,” the source quoted earlier said. So why does an internal candidate with deep knowledge of the airline’s working matter? He could be the key in Singh’s revival plan since  the Rs 1,500 crore investment being brought in is quite insufficient to steer the airline out of its current mess. Despite repeated attempts, Singh could not be reached for comments. [caption id=“attachment_2025237” align=“alignleft” width=“380”] Reuters[/caption] Global aviation consultancy CAPA has already estimated that the immediate fund infusion of $250 million or roughly Rs 1500 crore may need to be boosted with another $200 fund infusion in the near future. This insider will have to manage key contracts, renegotiate them, make part payments and yet expand the airline slowly to take it out of losses. As on date, lease rental dues to lessors amount to over Rs 700 crore and airport dues are nearing the Rs 300 crore mark (including state-owned and private ones). Singh has already said that SpiceJet will be a true LCC and that he will shrink operations to lessor stations while increasing flight frequencies. There is also a possibility of the airline discarding its twin fleet strategy by getting rid of the Bombardier fleet. Though this may present a problem since these aircraft were taken on loan from EDC of Canada and the loan will have to be repaid in full. Later, the new management is also expected to slowly expand the curreny Boeing 737 fleet from 17 at present. Singh’s team may also comprise another close associate who was with SpiceJet in its earlier avatar, handling public relations. A source associated with SpiceJet’s revival had earlier indicated that at least some of the top management people seen close to the outgoing management may be asked to leave. “There is one particular top honcho whose salary is inexplicably high. Comparable salary for the same role in other LCCs like InidGo is just a fourth. There is no reason for such people to continue,” this source had said. In an interview to the Hindu Business Line this morning, Sun Group CFO S L Narayanan said Managing Director S Natrajhen will be resigning from the airline. Natrajhen was seen as Marans’ man in Delhi. In the same interview, Narayanan also said the Marans will be incurring a “substantial” capital loss on this transaction. Singh’s plan to take ownership and management control of SpiceJet involves total infusion of Rs 1500 crore in three tranches by March. From all available indications, he will be exempted from making an open offer to the public shareholders of the airline by the Ministry of Civil Aviation. According to sources, The ministry has cleared the recapitalisation plan submitted by Ajay Singh and has forwarded it to the DGCA and as of now, the Marans will not hold any stake in the airline.