SpiceJet Inches Ahead, Miles From Former Glory

Earlier in January struggling budget airline SpiceJet announced its plan to re-induct its grounded Boeing 737 MAX aircraft into operations. By April this year, the airline wants to unground 10 aircraft and bring them back into their fleet. SpiceJet chairman and MD Ajay Singh called it a reflection of SpiceJet's unwavering commitment to growth.

This is a step in a series of efforts the airline is taking to keep itself afloat. But will it work?

“SpiceJet is at risk of being edged out of the market if it doesn't keep up with competitors, as its market share has dwindled to an almost insignificant level. Strengthening their fleet and operations is crucial to reclaiming market share, which is vital for their long-term survival,” J Krishnan, Former President and Board of Advisors at The Air Cargo Agents Association of India (ACAAI) told The Core.

Launched in 2005 as a popular low-cost carrier, SpiceJet has faced years of turbulence with grounded aircraft, lessor disputes, financial struggles, mounting debts, and a shrinking market share.

A significant hurdle for SpiceJet has been its legal disputes, led by payment delays that caused conflicts with aircraft lessors. In October 2024, the airline resolved a $23.39 million dispute with lessors Aircastle and Wilmington Trust, agreeing to pay $5 million.

India’s aviation industry suffered tremendous losses during the pandemic, and while some like GoFirst failed to recover, SpiceJet trudges on. However, troubles for the airline had started long before the pandemic.

Amid a series of financial challenges, the airline's ungrounding of aircraft was a significant step forward. Last week, the airline's share prices rose as much as 4% on the news of the reintroduction of flights, even as it raised funds to pay off its dues over the past year.

Signs Of Recovery

The resolution in October followed a similar settlement with BBAM, a US-based aircraft leasing firm, in October 2024. These legal resolutions have provided a much-needed sense of stability for the airline’s operations.

“A key factor in their turnaround seems to be resolving disputes with lessors, bringing much-needed stability. With these agreements in place, there is now a level of certainty that operational disruptions will be avoided, which likely played a significant role in driving their recent decisions,” Krishnan added.

Another encouraging sign of SpiceJet’s recovery is the overwhelming response to its Qualified Institutional Placement (QIP) in September 2024. The airline raised an impressive Rs 3,000 crore through the placement, which opened on September 16 and closed on September 18.

The success of the QIP demonstrates investor confidence in SpiceJet’s potential for growth despite its financial struggles.

“Currently, SpiceJet’s operations may not be entirely stable, but there’s noticeable progress. Rs 3000 crore is a mix of dilution which was done by Ajay Singh on his personal level and some were from the equity investors,” S. Hari, CEO, OneAvia services and industry expert told The Core.

As of January 2025, SpiceJet operates approximately 250 daily flights to 48 destinations within India and to international destinations, including 32 new flights for the winter schedule. In November 2024, the airline expanded its domestic network by launching eight new flights connecting Jaipur with Varanasi, Amritsar, and Ahmedabad, as well as linking Ahmedabad with Pune.

The airline faced challenges in maintaining its fleet size. In March 2024, SpiceJet's operational fleet comprised 39 planes, while the total fleet size stood at 63. By August 2024, the operational fleet had reduced to 21 aircraft.

“When SpiceJet was facing a severe financial crunch, its aircraft were grounded, and engine replacements were stalled. These issues highlighted the need for a robust balance sheet and a solid funding mechanism. Without these, the airline struggled to maintain operations. Additionally, when aircraft are grounded, lessors and suppliers often withhold equipment, further compounding the delays,” Hari added.

What Worked?

The reintroduction of Boeing 737 MAX and other aircraft, including four Boeing 737 MAX planes, back into service by mid-April 2025 is part of its larger recovery plan.

The airline had also scaled down its operations to the bare minimum to cut its losses. “Additionally, the promoters have played a crucial role by injecting funds directly into the company, prioritising internal financing over external borrowings. This promoter-driven effort to secure finances has been a key factor in helping the airline weather the storm—at least for now,” Krishnan said.

While Ajay Singh said that SpiceJet was on a strong path to recovery, it may not be time yet to rest easy. The airline still faces several challenges in its quest for a full recovery, and legacy issues from previous ownership have added to its struggles.

When Singh took over the airline from the previous owner, Kalanithi Maran, in 2015, it also came with several legacy problems.

“Legacy issues inherited from the previous ownership also added to the difficulties, though it seems those issues have now been resolved,” Krishnan added.

Despite this road to recovery, SpiceJet isn’t really back to its former glory. As of December 2024, its market share had grown to 3.1% from 2% in October 2024. Compare this to a five-year high in market share reached in June 2019 at 15.6%. This was at 17.3% in October 2014.