SpiceJet pays part of AAI dues, escapes bank guarantee encashment

SpiceJet said that it has requested a waiver of interests for delayed payments made from March 2020 to March 2021

SpiceJet pays part of AAI dues, escapes bank guarantee encashment
A SpiceJet Boeing 737-800 at the Cochin International Airport. Image courtesy: Wikimedia Commons/Smokingsingh

Budget carrier SpiceJet settled a part of its dues towards the Airports Authority of India (AAI) to avoid the encashment of its bank guarantee.

According to a letter submitted to the AAI on April 1, SpiceJet said that it has paid Rs 4.53 crore on March 31, thereby reducing the actual principal amount of Rs 119.94 crore to Rs 115.41 crore, The Hindu Business Line reported. 

The amount of Rs 115.41 crore, importantly, brings SpiceJet's dues within 75% of its bank guarantees and 100% of cash deposits towards a total security cover of Rs 153.63 crore. This comes as a big relief for the debt-ridden airline, as according to the AAI credit policy if the total dues of an airline is more than 75% of the bank guarantees given by the airline, the AAI may encash them.

As of March 30, the outstanding principal amount owed by the airline was Rs 133.52 crore, including a tax deducted at source (TDS) amount of Rs 18.58 crore, which "SpiceJet would be depositing soon". 

Also read: Airlines owe nearly Rs 140 crore to AAI; GoAir and SpiceJet in spot of bother

The airline said that it has made a part of the interest payments. In a letter dated February 3, it requested a waiver of interests for delayed payments made from March 2020 to March 2021. 

SpiceJet also provided a TDS deposit certificate of Rs 20.52 crore in December 2020. It proposed to pay the remaining TDS amount in two instalments: Rs 5.3 crore by April 7, 2021, and Rs 13.28 crore by June 30, 2021. According to the Income Tax Act, SpiceJet is supposed to deduct income tax at a specified rate and deposit it with the AAI within a given period. This TDS amount, therefore, has to be excluded from the principal amount. 

"We want to reiterate the recent increase in Covid infections across the country and world has again led to a loss of revenue, drop in passenger traffic, lower load factor and lower passenger travel sentiments beyond the control of SpiceJet akin to force majeure conditions," the airline said. 

The AAI had decided to put SpiceJet on cash and carry mode since midnight of July 30, 2020, as the carrier's pending dues crossed Rs 200 crore, according to a Business Standard report. This forced the airline to make daily payments in order to avail of the AAI's services. Cash and carry mode means that the airlines facing it have to make an instant payment on per flight basis to avail of parking and landing facilities at AAI-run airports. The low-cost carrier said that it continues to make a daily payment of Rs 1.51 crore under the cash and carry mode. 

At the start of 2021, Spicejet had Rs 33.74 crore pending dues towards the AAI, which was the highest among the Indian carriers.

Also read: SpiceJet's zero change fee gift for flyers: What it is all about

SpiceJet reported a consolidated loss of Rs 105.61 crore for the September quarter of FY21, its third consecutive quarterly loss, according to Live Mint. This was a result of primarily muted travel demand in the wake of the coronavirus crisis. SpiceJet's loss in the same period in the previous fiscal was Rs 461 crore. The airline suffered a 57% drop in revenue in the September quarter, Ch-Aviation reported.

According to a report in Live Mint, SpiceJet witnessed its highest ever quarterly loss of Rs 807.07 crore in the March quarter of FY20, as against a net profit of Rs 56.29 crore in the same period a year ago. This led SpiceJet's auditors to question the ability of the company to continue as a going concern. This massive loss was reported to be a result of plummeting travel demand owing to the Covid-19 pandemic, the grounding of the Boeing 737 Max and pricing pressures.   

SpiceJet's negative net worth stood at Rs 2,285.37 crore as of September 30, 2020. It had also deferred payments to its vendors. 

The carrier's financial woes come amid SpiceJet Chairman and Managing Director Ajay Singh throwing his hat into the ring, with the support of Ras Al Khaimah Investment Authority and Ankur Bhatia, promoter of Delhi-based Bird group, in a bid to acquire the struggling national carrier Air India. 

SpiceJet has also signed a memorandum of understanding (MoU) with Avenue Capital to sell and lease back 50 aircraft. It had also sought a one-time debt restructuring and Rs 500 crore working capital from Yes Bank to tide over the hit suffered due to the Covid-19 pandemic.

(Cover image courtesy: Wikimedia Commons/Smokingsingh)