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SpiceJet shares jump after $91-M settlement, is recovery in sight for grounded airline?

Published 2024-03-26, 06:11 a/m
SpiceJet shares jump after $91-M settlement, is recovery in sight for grounded airline?
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Indian budget carrier SpiceJet (SPJT.BO) made headlines on Tuesday with its announcement of a settlement agreement with Export Development Canada (EDC) worth approximately $91 million.

This deal allows SpiceJet to take ownership of 13 Bombardier (TSX:BBDb) Q400 aircraft, marking a significant breakthrough in the airline’s ongoing financial restructuring efforts.

SpiceJet shares rise on news

The news sparked an uptick in SpiceJet’s share price, surging by 6.5% in afternoon trade.

Investors responded positively to the settlement, viewing it as a crucial step towards the airline’s recovery amidst a challenging operating environment.

SpiceJet’s financial restructuring

In recent months, SpiceJet has been actively pursuing settlements with various lessors, including Aercap, the world’s largest aircraft lessor, as part of its efforts to restore its grounded fleet and return to full operational capacity.

These efforts have been complemented by cost-saving measures aimed at alleviating the airline’s financial strain.

Impact on cost-saving initiatives

The settlement with EDC represents the latest cost-saving exercise for SpiceJet, with anticipated savings of $68 million.

The recent job cuts are expected to contribute annual savings of $12 million, further bolstering the airline’s financial position.

SpiceJet’s liabilities and fleet ownership

The liabilities addressed in the settlement stemmed from a loan obtained from EDC for the purchase of 15 Bombardier Q400 aircraft in 2011.

With ownership of 13 Q400 jets secured, SpiceJet aims to enhance its operational capabilities, particularly on regional routes, leveraging the versatility of these aircraft.

SpiceJet’s increasing ownership of its fleet signifies a strategic shift for the airline, granting it greater autonomy and flexibility in route planning and operational decisions.

The settlement underscores SpiceJet’s commitment to resolving financial disputes and fortifying its position in the competitive aviation market.

Is SpiceJet’s on track to recover?

As SpiceJet continues to navigate challenges posed by the pandemic and operational disruptions, its recent settlements and cost-saving initiatives signal a potential path to recovery.

The airline’s ability to effectively manage liabilities and streamline operations will be critical in sustaining momentum and regaining investor confidence.

“We are pleased to have reached this settlement agreement with EDC and we thank their leadership and management team for their cooperation, understanding, and progressive approach through the process. This significant milestone will allow us to strengthen our balance sheet and position the airline for long-term success,” said CMD Ajay Singh.

This article first appeared on Invezz.com

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