SpiceJet's Debt-For-Equity Swap: Lifeline For Airline Or Just Another Quick Fix?

SpiceJet keeps finding creative ways to stay airborne, but investors watching the SpiceJet share price aren't convinced the turbulence has ended. 

The budget carrier recently wrapped up another round of debt conversions. It issued over 10 crore shares to aircraft lessors, reducing its obligations by Rs 442 crore.

While management views this debt deal as part of its recovery plan, the SpiceJet share price is down almost 40% over the last year due to potential dilution for existing shareholders. 

Valued at a market cap of Rs. 4,963 crore, SpiceJet stock is down 75% from its all-time high in November 2025. 

Debt-for-equity swaps take place when companies run out of cash to pay their bills. SpiceJet fits this profile perfectly after years of burning through capital. The airline posted a widening net loss of Rs. 634 crore in the September quarter, compared with Rs. 442 crore in the same period last year. 

Revenue dropped 13% year over year to Rs. 781 crore as the company struggled with a grounded fleet and foreign-exchange headwinds. Converting debt into equity lets SpiceJet avoid immediate cash payments, but the trade-off is massive shareholder dilution.

The Carlyle Aviation deal tells the whole story. SpiceJet issued shares at Rs 42.32 each to clear liabilities of Rs. 442 crore. That conversion price now looks generous, given that the SpiceJet share price has fallen below Rs 36. 

The transaction unlocked some valuable assets, including $79.6 million in maintenance reserves and access to nearly $90 million in total liquidity. 

Carlyle essentially made a calculated bet that holding equity gives it more control over SpiceJet's future than being just another creditor waiting in line. The lessor gets a seat at the table while the airline gets breathing room to keep operating.

Given SpiceJet's weak fundamentals, these debt conversions seem more like temporary fixes to shareholders. For instance, the company's auditor has raised going-concern warnings as accumulated losses have exceeded Rs 8,600 crore. Moreover, its current liabilities exceed current assets by more than 4,200 crore.

We can see that lowering overall debt obligations by Rs 442 crore barely makes a dent, and SpiceJet has to stage a spectacular turnaround to regain shareholder confidence. However, the airline remains structurally unprofitable with no clear path back to sustainable operations.

Chairperson Ajay Singh frames these deals as part of a broader turnaround effort. Singh emphasised that the Carlyle transaction is an important milestone that provides meaningful support for fleet revival and expansion. 

He claimed that several other restructuring initiatives are underway, which indicates further dilution for existing shareholders.

Down 30% year-to-date, the market has clearly lost faith in management's ability to execute a turnaround.

India's airline industry presents brutal economics with high fuel costs, fierce competition from IndiGo and constant regulatory challenges. 

SpiceJet faces additional headwinds as a significant portion of its fleet is sitting idle due to unpaid dues to lessors and maintenance providers.  While recent deals have freed up some aircraft and provided access to maintenance reserves, the airline remains far from operating with a whole fleet. 

The broader domestic aviation sector is projected to post losses of between Rs 9,500 and Rs 10,500 crore this fiscal year, indicating that SpiceJet's troubles reflect industry-wide problems rather than isolated mismanagement. The company's Q2 presentation shows ambitious plans to double the operational fleet and triple available seat kilometers by year-end. 

Management projects 225 daily flights in December, up from 104 in July. In this period, it expects to double the number of operational aircraft from 20 to 40. The airline secured damp-lease agreements for 19 aircraft and plans to return eight grounded Boeing planes to service by April.

These expansion targets sound impressive on paper but require massive capital that SpiceJet doesn't have. More debt conversions mean more dilution, creating a vicious cycle where the SpiceJet share price keeps falling as new shares flood the market.

Looking at the quarterly numbers reveals why investors remain skeptical. 

• Available seat kilometers dropped 18% quarter-over-quarter, while revenue per available seat kilometer fell 15%. 

• Total operating costs per available seat kilometer increased 6% as the airline faced expenses from grounded aircraft and foreign exchange losses.

•  The company burned through 392 crore rupees in negative Ebitdar during the quarter. 

Between fiscals 2025 and 2028, analysts forecast SpiceJet to increase revenue at an annual rate of 15.4%. However, the company is still forecast to report a loss per share of Rs 2.96 in fiscal 2026. 

Given consensus price target estimates of Rs 30.65, SpiceJet stock trades at a premium of 13% in November 2025.