A day after the Civil Aviation Ministry requested oil companies, airports and banks to lend a helping hand to SpiceJet, SL Narayanan, Chief Financial Officer of the Sun Group, spoke to BusinessLine about the implications. The airline, controlled by billionaire Kalanithi Maran’s Sun Group, managed to operate only 75 flights on Wednesday, down from the usual 200 a day, as oil companies refuelled aircraft only after SpiceJet cleared dues of ₹3 crore. Irate passengers vented their anger on the airline’s airport staff around the country as flights were cancelled. Banks, which currently don’t have any loan exposure to SpiceJet, say they are unlikely to lend it any money.
Yet, Narayanan believes that a turnaround is possible, thanks to falling crude oil prices, as also the smaller fleet and capacity rationalisation, which he feels will give the airline pricing power. Edited-excerpts from the e-mail interview:
The promoters have not been able to make any headway with fund raising, which is why we sought the intervention of the Government. The promoters are ready to give personal guarantees to give comfort to the lenders.
By when do the promoters intend to give an assurance so that banks can be requested to give working capital loans to the airline?
The promoters have publicly articulated this assurance.
Given the poor financial health of the airline, why should any bank or financial institution look to lend to SpiceJet? Even your auditors have said the airline is not a going concern…
What we have on the balance sheet is indeed a lot of accumulated losses and that’s unfortunate. However, banks need to ascertain whether SpiceJet can turn viable on the back of the rapidly changing prospects for the industry.
I believe that the fall in crude prices makes such a turnaround a possibility. I also believe that our smaller fleet and rationalisation of capacity give us better pricing power.
What attempts are being made to resolve the issue of oil companies refusing to refuel SpiceJet aircraft till they are paid?
We hope to settle those dues with the interim funding that we are requesting the Government to help with. We have always paid OMCs (oil marketing companies) in advance for as long as I can remember. We had just three days’ dues.
Has any part of the statement issued by the Government late on Tuesday — opening bookings till March 31, requesting oil companies to give 15 days’ credit and asking airport operators to allow 15 days’ time for payments — been implemented yet?
This has been fully implemented by airports but not by the oil marketing companies till now.
Will SpiceJet look at using the external commercial borrowing (ECB) window, which the Finance Ministry is being requested to provide? How much will you look to raise and what will be the advantage?
We would ideally like to keep ECBs as a last resort as the rupee has been pretty volatile due to several macro developments linked to the fall in crude prices. We simply cannot take more risks associated with foreign exchange rates.