Trouble seems to be pilling up for debt-ridden SpiceJet as media reports suggest that the budget carrier may be heading the Kingfisher way. According to an Economic Times report , the Directorate General of Civil Aviation (DGCA) is carrying out an engineering audit of SpiceJet after the carrier is said to have found it difficult to provide equipment to operate some flights.
The airline has 52 aircraft fleet comprising Boeing 737s and Bombardier Q-400s.
DGCA has also sought details on dues to various vendors from SpiceJet to ascertain the airline's financial condition. SpiceJet owes about Rs 200 crore to the Airports Authority of India (AAI) and various tax authorities as adverse operating environment has impacted its performance. The dues include Rs 110 crore outstanding to AAI, disclosed by the civil aviation ministry last week.
Separately, the DGCA has also asked Spicejet to refund full fare to passengers for a flight delayed for 4.5 hours.
But that's not all. According to TOI report , the loss-ridden low cost carrier (LCC) deducted tax from their salaries but has neither given a TDS certificate, nor Form 16 so far. This has made employees very nervous with several of them raising questions if the same has indeed been deposited with the government. However, the report quoted a company source putting the blame on "technical glitch" and promising that the issue will be resolved soon.
(Also Read: Airlines' tug-of-war puts aviation min in a spot )
This is not the first time this has happened. In FY14, audit firm Batliboi said Spicejet was not regularly depositing "undisputed statutory dues", which included TDS, VAT and service tax.
Spicejet has been in financial mess, posting record losses of Rs 1003 crore in FY14, which were five times higher than pervious year. Its total debt stands at around Rs 1736 crore as on March 2014, while its networth has plunged to a negative Rs 1020 crore.
Centre for Asia Pacific Aviation (CAPA) India head Kapil Kaul estimates that SpiceJet requires about USD 250 million as of March, 2014, to bring its books in order. It may require further fund infusion for growth and expansion. For SpiceJet, raising capital in next one to three months is critical.
The LCC's restructuring efforts are not showing results largely due to very complex competitive dynamics. The airline space has been a witness to several fare wars in recent times with the advent of the Indian arm of Malaysian carrier AirAsia, which launched flights with all inclusive fares of Rs 990.
IndiGo followed with a Re 1 base fare. This forced SpiceJet to cut ticket prices for the peak travel season, from September till December, to induce travellers to book tickets in advance. And with the government recently clearing proposals for several airlines to be launched in the country, this price war is likely to intensify further.
Kaul expects a significant downsizing for the Kalanithi Maran-controlled SpiceJet post the possible fund infusion.
SpiceJet stock price
On July 30, 2014, at 09:20 hrs SpiceJet was quoting at Rs 15.60, down Rs 1.1, or 6.59 percent. The 52-week high of the share was Rs 28.90 and the 52-week low was Rs 12.50.
The latest book value of the company is Rs -22.24 per share. At current value, the price-to-book value of the company was -0.70.
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