As the second wave decimates passenger numbers, SpiceJet is feeling the pressure of the cash crunch. In addition to cutting costs, the airline is mired in several disputes with lessors over unpaid aircraft fees. Could the second wave result in lessors repossessing aircraft and reducing SpiceJet’s fleet? Let’s find out.
Impacting the fleet
According to a report from Credit Suisse, seen in Moneycontrol, SpiceJet’s fleet size has been falling for the last year. The report suggests that the budget airline’s fleet has shrunk by 25% due to the pandemic, but lower demand means that it has not lost market share yet. However, things could be getting worse for the airline.
Two lessons have recently asked SpiceJet to ground 10 of their leased planes over unpaid aircraft fees. This would further reduce the carrier’s fleet of crucial Boeing 737s at a time when the airline is hoping to seize every growth opportunity after the second wave slows down.
Data from Planespotters.net shows that SpiceJet has retired 12 planes since March 2020, mostly the popular 737-800s. However, this does not show the full extent of the carrier’s fleet issues. Of the 65 737s currently in the fleet, 13 are grounded MAX’s, while 15 are grounded for other reasons. While this could be due to demand, the planes could also be stuck due to notices from lessors.
The cash crunch caused by the pandemic has further stressed SpiceJet’s financial position. The carrier was already struggling to make lease payments even in late 2019, let alone after business was decimated.
This has led to BOC Aviation and Wilmington Trust Services suing the airline for $27 million for unpaid leases on six 737s. Other lessors could make similar decisions, repossessing aircraft and deploying them to paying airlines that need more aircraft.
However, what is different this time is the lessor’s appetite to repossess planes. Unlike last year, where demand was down globally, this summer will see airlines in the US, Europe, and China all bounce back to pre-pandemic levels. This will give impetus to leasing firms to supply more planes to these countries rather than allow SpiceJet to hold on to them for longer.
Cargo business slowing?
Undoubtedly, the reason behind SpiceJet’s survival thought this pandemic has been its focus on freight traffic. The carrier has added over a dozen new aircraft (including temporary freighters) to serve the booming cargo market. This has included larger aircraft like the Airbus A340, A321, and Boeing 767 from wet-lease operator Hi Fly.
However, this month saw SpiceJet return its first converted freighter back to Hi Fly. This was the converted A321 first added in October. It’s unclear why the aircraft left the fleet, but slightly slowing cargo demand could be one of the causes. If this were to happen, SpiceJet could find itself in a world of pain as it runs out of revenue sources quickly.