India’s SpiceJet and Go First granted US$20.5mn state aid

SpiceJet (SG, Delhi Int’l) and Go First (G8, Mumbai Int’l) have been granted state aid of INR1.2 billion rupees (USD17.1 million) and INR256.5 million (USD3.4 million) respectively, under the Indian government’s Emergency Credit Line Guarantee Scheme (ECLGS) that provides government-guaranteed loans to businesses affected by the COVID-19 pandemic.

This was confirmed on July 28, 2021, by newly-appointed Minister of State for Civil Aviation, Vijay Kumar Singh, in a written reply to a question in the Rajya Sabha, the Council of States or Upper House of the Indian Parliament, reported the Navbharat Times, one of the largest circulated Hindi newspapers in India.

“As per the information received from the National Credit Guarantee Trustee Company, until July 16, (2021), a guarantee assistance of INR3.49 billion (USD46.9 million) (under the ECLGS scheme) has been provided to borrowers belonging to the aviation sector,” he said.

He said the two airlines had borrowed funds under two different sections of the scheme: GoFirst had borrowed funds under ECLGS 2.0, which allows airlines with debts of between INR500 million (USD673,100) and INR5 billion (USD67.3 million) to borrow up to INR500 million (USD673,100). SpiceJet had borrowed money under ECLGS 3.0, which allows carriers to borrow up to 40% of their total outstanding loans, or up to INR2 billion (USD26.9 million).

He was responding to a question by K.C. Ramamurthy, a Rajya Sabha Member from the state of Karnataka, on the health of the air cargo sector in India and the Ministry’s plans to provide financial aid to the domestic aviation sector. Singh also revealed that India’s share of the international air cargo sector had grown from 2% to 19%, reported The Hindu newspaper.

As reported, SpiceJet on June 30, 2021, posted a net loss of INR2.35 billion rupees (USD31.6 million) for its fourth quarter ending March 31, 2021, lower than the INR8.07 billion (USD109 million) loss it experienced a year ago but more severe than expected due to India’s devastating second wave of COVID-19. Its net loss for the fiscal year was INR9.98 billion (USD134 million). It planned to separate its cargo business to operate as a separate entity as a means of raising capital and bolstering the company’s balance sheet.

Meanwhile, GoAir’s plans to raise INR36 billion (USD482.6 million) via an initial public offering (IPO) were put on hold by the Securities and Exchange Board of India (SEBI) earlier this month. GoAir, which is rebranding as Go First, planned to use the net proceeds of the IPO to repay outstanding borrowings and debt to Indian Oil Corporation Limited for fuel supplied. It also planned to replace with cash deposits the letters of credit it had issued to certain aircraft lessors towards securing lease rental payments and future maintenance of aircraft.

The government in May 2021 made assistance under the ECLGS scheme available to airlines, but only until September 30, 2021, or till guarantees for an amount of INR3 trillion (USD40.3 billion) are issued. Disbursement under the scheme will be permitted till December 31, 2021.