Updated: January 16, 2015 9:41:46 am
Budget carrier SpiceJet took a decisive step towards restoring normalcy of operations, with the airline’s board of directors approving a proposal of principal shareholder and promoter Kalanithi Maran and KAL Airways Private Limited to transfer the ownership, management and control of the company to former promoter and director Ajay Singh.
Singh, in partnership with JPMorgan Chase and a domestic investor, will infuse Rs 1,500 crore in three equal tranches into the cash-strapped carrier by March.
With the airline successfully managing to mobilise the promised funds, the civil aviation ministry on Thursday lifted the restriction imposed on the airline, which was barred from accepting booking beyond 31 March, 2015.
“The new investors will infuse Rs 500 crore every month till March to stabilise operations. With resources coming in, we have decided to left the earlier restriction on them to not accept booking beyond March 31, 2015.”
With Ajay Singh and partners checking in, this would be the fourth change of hands in the airline. Singh, along with Bhulo Kansagra, had resurrected the operating licence of ModiLuft to establish SpiceJet in 2005.
The duo later sold the airline to Kalanithi Maran’s Sun Group in 2010 for around Rs 750 crore. The Marans had subsequently infused another Rs 800 crore in SpiceJet.
Currently, Kalanithi Maran and his company, KAL Airways, together have 58.46 per cent stake in the airline. As on Thursday, the market cap of the airline stood at Rs 998.30 crore. Post the takeover, the current promoters will continue to own 10 per cent in the form of warrants in SpiceJet. The warrants upon conversion will lead to an infusion of Rs 90 crore. According to regulatory norms transfer of stake of over 25 per cent will trigger the launch of an open offer, unless Singh asks for an exemption.
“The Board of Directors of the Company has taken on record the proposal of the principal shareholder and Promoter, Kalanithi Maran and KAL Airways Private Limited to transfer the ownership, management and control of the Company to Ajay Singh…,” the airline said in a statement to the stock exchanges.
The transfer is part of the scheme to restructure and revive the airline. An appropriate application regarding the same will be made to regulatory authorities including the civil aviation ministry.
SpiceJet has outstanding dues of about Rs 2000 crore to various lessors, vendors, airport operators and tax authorities; of which Rs 1400 crore are immediate liabilities.
Sources in the know said that frequent flash sales and the induction of a Bombardier fleet were the two key reasons that led to the current financial mess in the airline.
With Singh slated to take control of the carrier, a top-level management change is expected to take place shortly. Singh has also indicated that he may phase out the airline’s Bombardier fleet.
“Ajay Singh will have to rework his fleet, network and people strategy. The airline has excellent slots, brand and staff. Given the right support, SpiceJet can rebuild itself over the next 8-12 months into a lean, mean and profitable airline”, said Amber Dubey, partner and India head of aerospace and defence at KPMG.
The airline has cancelled over 2,000 flights and delayed salary payments in December as well as January.
“It is a welcome development. Failure of an airline with 17 per cent market share is the last thing the aviation sector needs,” Dubey said.
📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines