Rescue plan for SpiceJet seen by end of January - sources

NEW DELHI (Reuters) - A package to bail out SpiceJet Ltd could be finalised as early as this month, two sources with direct knowledge of the deal told Reuters, raising the prospect of a last-minute rescue for the indebted carrier.

SpiceJet, India's second largest budget airline, was forced to ground its fleet briefly last month after it ran out of cash to pay creditors and its majority owner, billionaire Kalanithi Maran's Sun Group, said it would not put up any more money.

Two days later, SpiceJet co-founder Ajay Singh said he was working on a financial plan with U.S. private equity investors, under which the current owners would sell their stake and fresh capital would be injected into the airline.

Singh and his partners this week handed the government a more detailed plan, and a package could be ready as early as the end of January once due diligence is completed, a senior civil aviation ministry official and a source close to the situation said. Both individuals spoke on the condition of anonymity.

Singh was not available for comment on Friday. SpiceJet declined to comment.

The government is keen to avoid what would be the second collapse of an airline since 2012, following the grounding of Kingfisher Airlines Ltd less than two and a half years ago.

Loss-making SpiceJet, which began life in 2005, employs around 5,000 people and operates 230 flights a day in a market where demand for air travel is rising rapidly but making a profit has proven difficult for most major airlines.

SpiceJet will also start paying money it owes the airport regulator, the aviation ministry official said.

The carrier had been granted several extensions, the latest of which expires on Saturday, while talks with potential investors continue.

(Reporting by Tommy Wilkes; Editing by Clara Ferreira Marques and Elaine Hardcastle)