Irish aircraft lessor Babcock and Brown Aircraft Management has sought the return of six Boeing B737 aircraft and a payment of $100 million (Rs 600 crore) from troubled budget airline SpiceJet to cover several months of unpaid rent and maintenance costs.
Sources said despite SpiceJet trying to negotiate afresh, Babcock and Brown had informed the airline it was not willing to do any further business. Babcock and Brown had ended lease agreements in December, when SpiceJet was trying to reduce its fleet. But the airline is operating five of the aircraft and another is in maintenance.
“Babcock and Brown has been trying to repossess the aircraft. It has said it will not renegotiate and has remarketed some of the B737s to other airlines such as Turkey’s Pegasus Airlines,” said a source.
Babcock and Brown, one of SpiceJet’s biggest lessors, had leased 18 B737s to the airline a year ago. It also leases aircraft to other Indian carriers like Jet Airways. Babcock and Brown had filed a plea to the Delhi high court, asking it to direct the Directorate General of Civil Aviation to cancel the registration of five B737 aircraft. The judgment was reserved on Monday and is expected soon.
A SpiceJet spokesperson said in response to queries, "Without commenting on specifics, commercial issues are privileged between us and our partners. In general, with the change of ownership and imminent recapitalisation, we expect all matters related to payables to be resolved soon in cooperation with our partners and suppliers. We are also in the process of growing our Boeing fleet to 26 aircraft by the start of the 2015 summer schedule."
SpiceJet has a fleet of 17 leased Boeing 737s and 15 Bombardier Q400s it owns, but it is fighting court battles with lessors seeking repossession of up to 12 of the former type of aircraft. Besides Babcock and Brown, other lessors that have taken legal recourse are China’s BOC Aviation and Ireland’s AWAS, each of which has leased three aircraft. SpiceJet’s lessors also include the China-based ICBC, Japan’s MCAP and the US-based Air Lease Corporation.
SpiceJet could find itself in a tough spot if forced to return aircraft. It could be forced to cut jobs further. It has already reduced headcount by more than 1,000 to 4,000, and a drastic reduction of its fleet would make a turnaround difficult, analysts said.
The development comes as bad news for new investors, led by founder-promoter Ajay Singh, who in a revival plan presented in January, promised to pump Rs 1,500 crore into SpiceJet by April. Singh has approval from the Union civil aviation ministry and the SpiceJet board to transfer current promoter Kalanithi Maran’s 58 per cent stake to himself. The investors put in Rs 100 crore on January 25 and Rs 400 crore is expected on February 15.
SpiceJet has liabilities of Rs 1,400 crore, including Rs 300 crore to the state-owned Airports Authority of India, Rs 700 crore to lessors, and the remaining split among vendors for catering and ground support.