Airlines follow a pretty simple formula for success — fill as many seats and fly as many hours as possible, and keep a young fleet. One Indian budget carrier is going another way to drum up income — not flying.<\/p>\n
SpiceJet Ltd. hasn\u2019t flown any of its Boeing Co. 737 Max jets for more than 27 months, after two deadly crashes operated by other airlines led to a global grounding. While most other major markets apart from China have cleared the Max to fly again, SpiceJet seems in no hurry to get it back in the air, and not just because there\u2019s less demand to use the jet because of the pandemic.<\/p>\n
India\u2019s second-biggest budget carrier booked other income of 10.9 billion rupees ($150 million) in the seven quarters through December. That was the amount it expected to get in compensation from Boeing for not being able to fly its 13 Max aircraft, helping the company to trim its losses during deeply challenging times. Given the planes remain grounded, the figure is likely to rise when SpiceJet reports results for the year through March on Wednesday.<\/p>\n
SpiceJet is the only Indian airline that operates the Max. With firm orders for 142 more, it\u2019s also one of its biggest customers globally. Yet the carrier hasn\u2019t asked regulators to lift the flying ban in India, a person familiar with the matter said. There\u2019s no clarity on why it has held back, and it would take at least a month after applying to get approvals in place, the person said, asking not to be identified as the matter is confidential.<\/p>\n
SpiceJet declined to comment. Boeing said it continues to work closely with aviation regulators in India and elsewhere about returning the Max to service, but doesn\u2019t comment on talks with its customers.<\/p>\n
In its previous quarterly results, SpiceJet said management was confident of collecting the compensation from Boeing. At the time, however, auditor Walker Chandiok & Co LLP said there was \u201cno virtual certainty\u201d the other income would be recognized, meaning there was no guarantee that the figure would materialize.<\/p>\n
\u201cSpiceJet is using this accounting method to shore up their results, and obviously to make sure that they don\u2019t need to bring in solvency capital of a magnitude which would dilute the current ownership,\u201d said Shailesh Haribhakti, a chartered accountant and chairman of Shailesh Haribhakti & Associates, adding that such an approach is allowed under Indian regulations.<\/p>\n
Analysts expect SpiceJet to post a loss of 10 billion rupees, which would be its third-straight annual loss. The carrier almost shut down in 2014 after running out of money, only to be rescued by co-founder Ajay Singh, who as chairman has changed its network, renegotiated vendor contracts and diversified into businesses including a dedicated cargo service, retail and health care.<\/p>\n
SpiceJet shares were up nearly 1 per cent at 83 rupees as of 9:30 a.m. in Mumbai. They\u2019ve fallen 13 per cent this year, while the benchmark S&P BSE Sensex index has risen more than 10 per cent.<\/p>\n
SpiceJet\u2019s fleet includes other Boeing 737 models and Bombardier Inc. Q400 turboprops, though it isn\u2019t operating near the capacity it was before Covid. The airline carried just 3.9 million passengers in the first five months of 2021 as the outbreak in India worsened, a slump of more than 52 per cent from the same period in 2019.<\/p>\n
The 737 family has been the backbone of SpiceJet\u2019s fleet all along, with the company previously saying the \u201chighly sophisticated\u201d Max would allow it to compete better and expand profits.<\/p>\n
While those profits aren\u2019t expected now, the Max — even when grounded — might offset some of the pain from last year.<\/p>\n
\u201cAn entity must be allowed to account for a highly anticipated inflow of economic benefit,\u201d said Suvigya Awasthy, a New Delhi-based Associate Partner at PSL Advocates and Solicitors, who specializes in commercial disputes.<\/p>\n","protected":false},"excerpt":{"rendered":"
Airlines follow a pretty simple formula for success — fill as many seats and fly as many hours as possible, and keep a young fleet. One Indian budget carrier is going another way to drum up income — not flying. SpiceJet Ltd. hasn\u2019t flown any of its Boeing Co. 737 Max jets for more than 27 months, after two deadly crashes operated by other airlines led to a global grounding. While most other major markets apart from China have cleared the Max to fly again, SpiceJet seems in no hurry to get it back in the air, and not just […]<\/p>\n","protected":false},"author":39,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[229],"tags":[],"class_list":["post-423431","post","type-post","status-publish","format-standard","hentry","category-civil-aviation"],"acf":[],"_links":{"self":[{"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/posts\/423431","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/users\/39"}],"replies":[{"embeddable":true,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/comments?post=423431"}],"version-history":[{"count":0,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/posts\/423431\/revisions"}],"wp:attachment":[{"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/media?parent=423431"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/categories?post=423431"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/tags?post=423431"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}