Court Ruling Increases Pressure on India’s SpiceJet Over Unpaid Leases

SpiceJet (SG, Delhi International) faces mounting pressure as two engine lessors, Team France 01 SAS and Sunbird France 02 SAS, have rejected an offer from managing director Ajay Singh to use personal shares worth USD 2.5 million as collateral against unpaid lease arrears. This development follows a Delhi High Court decision requiring personal guarantees from SpiceJet’s directors to extend the payment deadline.

The lessors, controlled by ST Engineering, have been in legal battles with SpiceJet over unpaid leases for three engines, with arrears dating back several years. Last year, they reported that SpiceJet owed USD 12.9 million and sought a restraining order to prevent the airline from using the engines. Despite multiple court orders, SpiceJet has continued to use the engines.

During an August 8 hearing, SpiceJet’s counsel, Sandeep Sethi, argued that removing the engines would severely impact the airline’s operations and capital-raising efforts. He proposed a new payment plan and requested an extension, but Justice Manmeet Pritam Singh Arora insisted on personal guarantees from the directors due to repeated failures to fulfill previous undertakings.

On August 12, Sethi presented Singh’s offer of unencumbered shares to the court, promising their release if SpiceJet did not settle its debt by September 30, 2024. However, Raj Shekar Rao, counsel for the lessors, rejected the offer, stating concerns about the airline’s stability and demanding the return of the engines.

The ongoing courtroom disputes add to SpiceJet’s financial difficulties. The airline narrowly avoided canceling flights at Mumbai International due to unpaid airport fees and has recently canceled flights to Dubai for the same reason. Additionally, SpiceJet has informed employees of delays in June salary payments, attributing this to “pressing operational financial commitments.” The airline is seeking bridge funding to stabilize its cash flow.

SpiceJet’s board recently approved a INR 30 billion (USD 357 million) capital raise through an institutional placement, following an earlier January approval for INR 22.5 billion (USD 268 million). Despite these efforts, delays in wage payments and provident fund commitments continue to challenge the airline.

Sources: AirGuide Business airguide.info, bing.com, ch-aviation.com