SpiceJet's cargo business separation plan challenged by the lessors

Radhika Bansal

30 Sep 2021

SpiceJet's plans to spin off its logistics and cargo operations into a separate company called SpiceXpress are being challenged in court, with lenders and aircraft lessors opposing the move.

SpiceJet's lessor, Goshawk, and its trustees have petitioned the Delhi High Court (HC) for an injunction against the airline's plan to transfer any of its assets to a separate company until it pays $16.2 million in unpaid lease rentals on three aircraft.

In its interim order, the Delhi HC has restrained SpiceJet from alienating the assets.

(Image Courtesy - Burmarrad (Mark) Camenzuli)

“Till further orders, the judgment debtor is restrained from transferring/alienating its assets to the tune of the decretal amount,” stated the Delhi HC order.

The development is a big hurdle for the airline since hiving off and monetising the cargo unit remains one of the key strategies to recapitalise the company. The next date of hearing is on November 29. SpiceJet is in talks with multiple private equity investors to sell shares in the logistics arm to raise money.

People aware of SpiceJet’s business plans indicated that investors in their talks have made it clear that they want the cargo business to be ring-fenced and kept at an arm’s length from the passenger business.

The airline has also approached the Ministry of Civil Aviation for a new air operator permit for the cargo arm and has set up management, separate from the passenger business.

However, the airline said the request for a stay has been declined by the court on the transfer of the logistics business to its subsidiary.

“We would not want to get into the detailed interpretation of the court matter since it is sub-judice. We have been in discussion with all MAX lessors for a settlement and return to service of these aircraft. We have already done so with Avolon and CDB Aviation and discussions with other lessors, including Goshawk, are on. None of the MAX lessors (including Goshawk) has terminated any of the leases and is continuing to make all commercial efforts to resume safe operations of the MAX fleet."Spokesperson for SpiceJet

Last week, the company announced that it had received shareholder approval for a slump-sale of its cargo and logistics services business to SpiceXpress and Logistics, valued at INR 2,555.77 crore.

Slump sale refers to the transfer of one or more undertakings for a lump sum payment, regardless of how the undertakings were acquired. Individual assets and liabilities are not valued in such sales.

SpiceJet had leased three Boeing 737s from Goshawk (one B737-800 and two B737-MAX8s). On account of the Covid-19 pandemic, travel restrictions were imposed, resulting in the worldwide grounding of Boeing MAX8s. As a result, SpiceJet defaulted on its rent payment obligations and Goshawk appealed in a UK court for a summary judgment about its claim for arrears.

In May, the UK court passed a summary judgment, in which it ruled that Goshawk is right in claiming the amount, but stayed its order asking the lessor and SpiceJet to instead mediate saying that SpiceJet is currently in a precarious financial state and an order to pay all outstanding amounts may push it into bankruptcy.

Aircraft lease agreements are covered under the ‘hell or high water clause, which implies that lessees (in this case, airlines) should continue paying lease rentals, irrespective of any issues like financial losses.

Sources aware of the development said that the mutual mediation between Goshawk and SpiceJet has failed, following which Goshawk has moved Delhi HC to enforce the order.

SpiceJet's lenders were also concerned about the move. SpiceJet's cargo division has brought in revenue in the absence of growth in the passenger business. The logistics company would be spun off, removing one of the most important cash streams. According to sources, the airline has agreed with lenders that cash generated from the cargo arm's monetisation will be used first to pay off debts. An undertaking like this could aid the airline in obtaining a no-objection certificate from banks.

With the passenger business severely hamstrung, the logistics business has virtually been a lifeline for the airline. The logistics arm - SpiceXpress - earned a net profit of INR 30 crore, with revenue for the segment up 285% to INR 473 crore for the first quarter of 2021-22, from INR 166 crore in the same quarter last year.

This is a far cry from just five aircraft a year ago, with a fleet of 20 aircraft that includes four wide-body aircraft on wet-lease and passenger aircraft converted to carry cargo. The wide-body aircraft, which it wet-leased from Hi Fly, has been flying to multiple destinations in Africa, Europe, and Asia, including Lagos, Brussels, and Frankfurt, as well as Kabul, Tashkent, and Almaty. By the end of the year, it plans to add eight more wide-body planes.

(With inputs from Business Standard)

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IndiGo and American Airlines announce codeshare agreement| A brief history

Prashant-prabhakar

01 Oct 2021

In what has come as a surprise move, American Airlines entered into a codeshare agreement with Indigo on September 8.In February 2020, American Airlines announced a direct non-stop route between Bangalore and Seattle. Unfortunately, with the onslaught of the pandemic, the route was was pushed from the winter of 2020 to the summer of 2021 and beyond. The route is now slated for January 4, 2022.On the other hand, its rival United Airlines unveiled plans of launching routes between Bangalore and San Diego, only to be offset by AI, who launched the route first. The route is now slated to be launched in March 2022.

Not an easy path down the road

Financial Times

For American Airlines, this would be their maiden venture in the Indian market.Apparently, Seattle doesn't appear to be the choice of destination for travellers from Bangalore. That said, Seattle is the primary hub of Alaska Airlines, which is an American Airlines partner and would help feed traffic both ways.The American flight to Bengaluru is scheduled to arrive at 0005 hours local time and the estimated time of departure is 0300 hours.

Indigo, is the country's largest by fleet and domestic market share. Apparently, 29 indigo routes are marked for this codeshare agreement and will see American Airlines launching direct flights to New Delhi and Bangalore.Indigo also happens to be the only Indian carrier with an appreciable amount of red eye flights from major airports in India. American Airlines would be flying red eye flights to Thiruvanthapuram, Kochi, Coimbatore, Goa, Mangalore, Mumbai, Pune, Ahmedabad, Delhi, Chennai, Hyderabad, Nagpur, Kolkata and Vizag.

With every other destination having a transit point, this direct route to Seattle would be an attractive deal provided the pricing is done right.

As far as New Delhi goes, the codeshare agreement will go a long way in expanding the New Delhi- New York market, which is one of the most sought after routes.The American Airlines flight is scheduled to land in New Delhi at 1930 hours and will connect to almost every major city in the country with IndiGo. The entire flight time would be 2355 hours.

History says...

History shows American Airlines last flew to India in 2012 with direct flights to New Delhi but were later discontinued. Apparently, they were to collaborate with Kingfisher airlines but failed to materialize as the airline plummeted into total bankruptcy.

Why Indigo?

India Shorts

Quite frankly, with Vistara codesharing with its rival United Airlines, it didn't have much of a choice. Between Indigo and Spicejet, only Indigo has been successful in implementing it.American Airlines would be deploying a B787-9 to Bengaluru with 30 business class seats and 21 premium economy seats.

The aircraft to New Delhi—the B777— has eight first class, 52 business class and 28 premium economy seats. None of these classes exist on IndiGo, which is a single-class ,low-cost carrier.

The difference in service levels will be overcome by IndiGo offering business class passengers of American Airlines access to lounges with food and drinks.

COVER: Travel Trade Journal

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Taliban requests the resumption of commercial flights from Afghanistan to India

Radhika Bansal

30 Sep 2021

The Taliban-controlled Afghanistan Civil Aviation Authority (CAA) has written to Indian aviation regulator DGCA to resume commercial flights between the countries.

The Directorate General of Civil Aviation (DGCA) is yet to decide the matter.

The last commercial flight between India and Afghanistan was operated by Air India on the Kabul-Delhi route on August 15, the day Kabul fell to the Taliban. Afghanistan airspace was declared "uncontrolled" by the CAA on August 16.

In a letter dated September 7, 2021, CAA's Acting Minister Alhaj Hameedullah Akhunzada requested the DGCA to permit commercial flights of Ariana Afghan airline and Kam Air between India and Afghanistan.

Akhunzada stated in his letter: "As you are well informed that recently the Kabul airport was damaged and (left) dysfunctional by American troops before their withdrawal."With the help of technical assistance by Qatar, the airport became operational once again and a NOTAM (notice to airmen) in this regard was issued on September 6, he noted.

"This letter intends to keep the smooth passenger movement between two countries based on signed MoU and our national carriers (Ariana Afghan airline and Kam Air) aim to commence their scheduled flights," he said.

Therefore, Afghanistan CAA requests you to facilitate their commercial flights, Akhunzada noted. "The civil aviation of Islamic Emirate of Afghanistan avails its highest assurance," he added.

As a neighbour of Afghanistan, India is naturally concerned about the recent changes in that country and their implications for the region, Foreign Secretary Harsh Vardhan Shringla had said on September 20.

He demanded that Afghan territory should not be used for sheltering, training, planning or financing terrorist acts.

(Image Courtesy - Al Jazeera)

The Afghanistan airspace was declared ‘uncontrolled’ and was effectively closed for civilian flights on August 16 following the Taliban takeover of Kabul. Since then, the Taliban government, with the help of Qatar, has managed to resume several airports in the country, including at Kabul.

Ariana Afghan Airline has already been operating domestic flights, and the first international commercial flight post the takeover was operated between Islamabad and Kabul on September 13 by Pakistan International Airlines. Currently, regular international flights out of Kabul are being operated to Pakistan and Iran.

(Image Courtesy - Al Jazeera)

Speaking to the media on September 9 on the subject of the resumption of commercial flights between India and Afghanistan, Union Civil Aviation Minister Jyotiraditya Scindia said, "Yes, we are taking a longer route currently, as are most international airlines. When things get better, we will be back on the same track."

Before the Taliban takeover, India’s national carrier Air India and low-cost airline SpiceJet operated flights between Delhi and Kabul. While Air India operated its last scheduled flight to Kabul on August 15, SpiceJet had suspended its flights last year during the Covid-19 pandemic. These flights mainly flew medical tourists, students and traders as passengers, while carrying spices and dry fruits as cargo.

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Indigo to begin flights connecting to Kanpur from 4 metro cities

Radhika Bansal

30 Sep 2021

IndiGo will start flights connecting Kanpur with Delhi, Hyderabad, Bengaluru and Mumbai from October 31 onwards, the airline said on Wednesday, September 29.

Kanpur is the 71st domestic destination to be added to the airline's network.

"The airline will offer direct connectivity between Kanpur-Delhi effective October 31, 2021, and direct flights between Kanpur-Hyderabad, Kanpur-Bangalore, and Kanpur-Mumbai from November 1, 2021," it said in a statement.

https://twitter.com/jm_scindia/status/1443199564802973697?s=24

Meanwhile, Civil Aviation Minister Jyotiraditya Scindia took to Twitter to say that IndiGo will start flights on the Delhi-Bhopal route from October 31.

"I am happy that this will make it easier for the commuters," the minister added.

IndiGo is a low-cost carrier based in Gurgaon, India that commenced operations in Aug-2006. The carrier, which is owned by Rahul Bhatia’s InterGlobe Enterprises, operates an extensive domestic network and international services to South Asia, Southeast Asia, Europe and the Gulf.

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SpiceJet teams up with EaseMyTrip for the upcoming holiday season

Radhika Bansal

30 Sep 2021

Budget airline SpiceJet and online travel portal EaseMyTrip have teamed up to offer travellers a customised experience for holiday bookings for the upcoming season. Under this partnership, EaseMyTrip will offer customers a booking platform to SpiceJet. Customers will get discounts for trips to popular destinations like Kashmir and Goa and also to locations like Jaisalmer, as per an EaseMyTrip exchange filing. According to SpiceJet Chief Commercial Officer Shilpa Bhatia, the partnership between EaseMyTrip and SpiceJet will help both the companies leverage each other’s strengths and offer a complete end-to-end service for customers.

“We are excited to exclusively partner with SpiceJet and offer their users a wide range of holiday options. With a reviving holiday segment, we are exploring new avenues of growth from the sector, and this collaboration is a step towards that effort. Through this platform, we will be providing a hassle-free booking experience and the best-in-class services, for SpiceJet customers."Nishant Pitti, CEO & Co-Founder, EaseMyTrip

https://twitter.com/nishantpitti/status/1443109353536425987?s=24

Through this partnership, EaseMyTrip looks at expanding its presence across the holiday segment and address the existing customer base of SpiceJet. SpiceJet will offer benefits such as check-in, boarding, preferred bag out, complimentary meals and extra legroom seats onboard to travellers.

On the other hand, EaseMyTrip will facilitate the designing, contracting, and booking of these holiday packages, using their existing partnership across hotels, transfers and sightseeing to ensure excellent service delivery, according to the release.

The partnership will offer destination choices for the customers from the frequented ones such as Kashmir, Goa and Kerala to exquisite destinations like Jaisalmer, it said.

The travel portal also launched an initiative to offer travellers a full refund on domestic air ticket cancellations due to medical reasons.

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Ban on scheduled international flights extended by DGCA

Radhika Bansal

29 Sep 2021

The coronavirus-induced suspension of scheduled international commercial passenger flights has been further extended to October 31, 2021, India's aviation regulator DGCA said on Tuesday, September 28.

"However, international scheduled flights may be allowed on selected routes by the competent authority on a case-to-case basis," the circular issued by DGCA added. The DGCA circular also said that the suspension does not affect the operation of international all-cargo operations and flights specifically approved by it.

"In partial modification of circular dated 26-06-2020, the competent authority has further extended the validity of circular issued on the subject cited above regarding Scheduled International commercial passenger services to/from India till 2359 hrs IST of 31st October 2021. This restriction shall not apply to international all-cargo operations and flights specifically approved by DGCA," the circular read.

https://twitter.com/dgcaindia/status/1442818271472877568?s=24

Last month, the DGCA had extended the suspension on scheduled international commercial passenger flights till 30 September.

With scheduled international passenger flights to and from India remaining suspended since March 2020, special international flights have been operating under the Vande Bharat Mission since May 2020. The mission repatriates Indian citizens stuck across the globe due to the ban on international flights, as well as ferries foreign citizens to their country of origin. The flights were carried out by the government-owned airline Air India at first, but other airlines were later allowed to take part in the mission.

Air Bubble ArrangementIndia has also entered into air bubble arrangements with more than 25 countries for operating flights, including the US and UK. Under an air bubble arrangement between two countries, international passenger flights can be operated by their respective carriers into each other's territories subject to certain conditions.

Rules with regard to domestic flights, on the other hand, have been relaxed. The Ministry of Civil Aviation on September 18 had allowed airlines to operate a maximum capacity of 85 per cent of their pre-COVID domestic. The upper limit was earlier capped at 72.5%.

Prior to that, airlines were operating with much lower levels. Between June 1 and July 5, the capacity was capped at 50%, which was later hiked to 65% and then to 72.5%.

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