SpiceJet Ltd. is planning to take delivery of at least seven Boeing Co. 737 Max jets this year, according to people familiar with the matter, amid speculation the no-frills Indian carrier may not have enough cash to make pre-delivery payments.
The airline—the only operator of Max jets in the world’s fastest-growing aviation market—will add the planes in the three months through December, the people said, asking not to be identified because the discussions are private. The carrier is also negotiating for five more 737 Max jets, the people said.
SpiceJet ordered 155 of the jets with an option for 50 more in a USD 22 billion deal with Boeing back in 2017 and has 13 of the aircraft in its fleet currently.
While it’s unclear why the airline didn’t restart deliveries for close to a year after Indian regulators allowed the Max to fly again in August 2021 following two deadly crashes, people familiar said the relationship between the US planemaker and SpiceJet has soured.
Any transaction that would see SpiceJet begin taking deliveries again would therefore potentially be good news for Boeing in India, given its only customers with orders are SpiceJet and startup Akasa, which isn’t flying yet.
Clawing back market share is crucial to break Airbus SE’s stronghold, fortified by the nation’s top airline, IndiGo, being the biggest buyer of its best-selling A320neo jets.
A representative for SpiceJet said the airline will receive new 737 Max jets based on “mutually agreed” timelines from Boeing.
SpiceJet is in “advanced” discussions with lessors to induct additional Max aircraft to strengthen its “operational efficiencies and product performance,” the airline said in a statement. It added that Boeing will support active progress toward securing financing and deliveries through various lessors.
In a statement, a representative for Boeing said the planemaker continues to partner closely with its current and potential customers to support their fleet and operational requirements.
Taking deliveries of new planes would also be a coup for cash-strapped SpiceJet, which has lost money for the last three fiscal years. The debt-laden carrier in 2021 resorted to paying employees based on their hours worked and deferred salaries for some.
SpiceJet was trimming some of its losses by booking other income on the amount it expected to get in compensation from Boeing for not being able to fly the Max planes.
SpiceJet Chairman Ajay Singh said in November that Boeing agreed to compensate “in cash and in-kind” for the losses the airline incurred due to the grounding of 737 Max jets, without disclosing any amount.
Earlier in November 2021, the CMD of the low-cost airline, Ajay Singh said that SpiceJet plans to induct 50 ‘737 Max’ planes of Boeing into its fleet by December 2023. He had expected that the company would receive its 14th MAX by December 10 last year.
The airline is also looking at expanding its international operations using the 737 MAX. Possible destinations on the cards include Saudi Arabia and Hong Kong. Additionally, the airline is exploring scheduled long-haul services, including Canadian and European destinations, using widebody aircraft.
Earlier this year, SpiceJet posted a surprise profit, despite struggling in the previous months. But close inspection of its finances revealed that it was aided massively by its lodging of ‘other income’ for the value of USD 55.2 million – money attributed to the compensation from Boeing for the MAX delays.
(With Inputs from Bloomberg)