SpiceJet challenges court order to ground leased engines, citing public inconvenience

Cash-strapped SpiceJet has taken its legal battle to the Delhi High Court, seeking to overturn a single judge’s ruling that ordered the grounding of three of the airline’s leased engines on August 16. The engines, leased from French companies Team France 01 SAS and Sunbird France 02 SAS, were grounded because the airline had failed to make its lease payments.

Amit Sibal, senior counsel for SpiceJet, argued the urgency of the case and highlighted the significant inconvenience to the public that it could cause. “We have a fleet of only 21 aircraft. Each aircraft has two engines, so the shutdown of these engines would effectively result in the shutdown of two of our aircraft. This would cause significant inconvenience to the public,” Sibal said.

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Despite the request for immediate consideration, the Higher Regional Court refused to expedite the hearing and instead scheduled it for August 20.

The original order, dated August 14, also requires SpiceJet to return the engines within 15 days and allow their inspection. This decision came after the lessors rejected an offer by Ajay Singh, SpiceJet’s chairman and managing director, to pledge his shares as security for the airline’s liabilities. The lessors, who expressed doubts about the airline’s financial stability, insisted on the return of the engines and disclosure of Singh’s assets.

SpiceJet is facing increasing legal pressure, with previous court orders requiring directors to provide personal guarantees due to the airline’s ongoing financial difficulties.

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To mitigate these challenges, SpiceJet announced plans to ₹3,000 crore through a qualified institutional placement (QIP) by September 30. The airline committed to ₹4.9 crore from this capital injection to clear the outstanding debt by the end of September. However, the landlords have not shown any interest in further negotiations.

According to court documents, Team France 01 SAS and Sunbird France 02 SAS initiated legal action against SpiceJet in December 2023, claiming unpaid claims of over $20 million. SpiceJet has managed to pay $8.36 million towards these claims, but as of August 12, the outstanding amount is still $9.41 million.

SpiceJet’s financial problems are compounded by a series of cases before the Delhi High Court and the National Company Law Tribunal (NCLT), including a contempt of court case for failing to return assets to lessor TWC Aviation Capital Ltd.

For the quarter ended June 30, SpiceJet reported a consolidated net profit of ₹158.2 crore, a decrease of 20% from the ₹197.6 crore in the same quarter last year. The airline’s total revenue fell by 8.3% to ₹2,077.8 crore, while expenditure increased by over 7% to ₹1,919.6 crores.

At the end of June, SpiceJet’s total liabilities stood at approximately Rs. ₹11,252 Crore, a decrease of ₹11,690.7 crore as of March 31 and ₹12,420.2 crore by the end of December 2023.

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Given these financial challenges, Ajay Singh is reportedly planning to reduce his stake in the airline by over 10% to around ₹3,000 crore. Despite this dilution, Singh is expected to retain his position as the largest shareholder, with his stake expected to fall to around 30-35% after the capital raising by September.