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One-third of SpiceJet Boeings off its roster

March 20, 2015 08:47 IST

Delhi High Court has told the aviation regulator to deregister six of SpiceJet’s  Boeing 737 planes

A SpiceJet aircraftThe Delhi High Court on Thursday ordered the Directorate General of Civil Aviation to deregister six of SpiceJet’s Boeing 737 planes, following the termination of lease agreements by the leasing companies, Awas and BOC Aviation.

The court order could put SpiceJet’s revival plan under stress. 

The airline underwent a change of guard in January, with promoter and former director Ajay Singh stepping into the cockpit after the Marans decided to sell their majority stake to him and a consortium of investors. 

Singh, along with other investors, has infused Rs 400 crore (Rs 4 billion) into the airline to help it clear dues and is expected to totally invest Rs 1,400 crore (Rs 14 billion) by April-end.

A deregistration would lead to the grounding of aircraft and SpiceJet would have to trim its schedule, unless it secures a stay order or resolves its dispute with the lessors.

This could lead to the airline losing nearly a third of its Boeing capacity suddenly. SpiceJet is again faced with the possibility of flight cancellations, as happened in December when it reduced its fleet after defaulting on dues to vendors.

SpiceJet shares fell 4.4 per cent over the previous close to Rs 21.75 apiece on Thursday on the BSE exchange.SpiceJet flies 200-220 flights daily, with a mix of 18 Boeing 737s and 15 Bombardier Q400 turbo prop planes.

Each Boeing 737 flies five-six times a day.

The SpiceJet management said it was confident of negotiating with the leasing companies and had not made any changes to its schedule.

“We will study the order and will take necessary action as advised.

“In any case, a dialogue is on with the lessors and we are expecting to resolve the issue soon,” said a SpiceJet spokesperson.

A company executive added the airline had reached an in-principle agreement with one company (without specifying which one) and it expected to resolve the problem with the other, too.

The airline is also considering an appeal against the single-judge order.

Judge Rajiv Shakder directed DGCA to immediately deregister the planes on two writ petitions filed by the companies.

One of the petitions was filed by Wilmington Trust SP Services (Dublin) that is linked to BOC Aviation.

The other was filed by Awas.

Based in Singapore, BOC Aviation is owned by Bank of China and has a portfolio of 250 owned and managed planes. 

Awas, headquartered in Ireland, has a portfolio of 300 planes.

The lessors had terminated the lease agreements as the airline defaulted on rent. The Delhi High Court judgment does not give details of the dues.

Another aircraft lessor, Babcock and Brown Aircraft Management, has sought the return of six Boeing B737 aircraft and a payment of $100 million (Rs 600 crore) from SpiceJet, to cover several months of unpaid rent and maintenance costs.

It, too, has moved Delhi High Court, seeking deregistration of aircraft.

The court observed DGCA was under obligation to deregister planes on receiving a request from a leasing company in accordance with the Cape Town Convention.

India has ratified the convention that protects lessor interests and it amended the aircraft rules last month, giving the convention legal force.

The court rejected SpiceJet’s plea that deregistration was against public interest and gave DGCA two weeks to ascertain liens on the aircraft in two weeks, to enable the lessors to repossess and fly the planes out of India.Leasing companies have faced difficulties in repossessing planes in the case of Kingfisher Airlines earlier.

When the lessors terminated leases on defaults in payments and sought to repossess the planes, their efforts were hampered by litigation and delay by the government to deregister the planes.

The problem for lessors was compounded as the Airport Authority of India detained Kingfisher Airlines’ planes even after deregistration.

BS Reporter in Mumbai
Source: source