SpiceJet Best Placed To Gain From Jet Airways’ Woes

SpiceJet Ltd. stands to gain the most as a debt-trapped Jet Airways (India) Ltd. teeters on the brink of a collapse after lenders delayed an emergency lifeline.

A closure of Jet Airways will not only help SpiceJet to grab its market share but will also lead to higher ticket prices.

Share prices of SpiceJet rallied as much as 14 percent as India's second-largest carrier inducted nearly 21 new planes in the last five days, making the most of the ongoing capacity crunch seen in the aviation space. Most of these planes will be added to SpiceJet's fleet in the next 10 days, while three of them will come in by June-end.

Jet Airways was running about seven planes after non-payment to lessors forced it to ground aircraft. India's first private sector full-service carrier was waiting for Rs 1,500-crore debt support from lenders. But bankers told BloombergQuint on the condition of anonymity that they await a direction from the government as they fear prosecution later.

The delay not only threatens the survival of the carrier but has also eroded its value, according to Mark Martin, founder and chief executive officer at Martin Consulting. “SBI has destroyed Jet's value. The funds were supposed to be used by the company to retain aircraft, but due to SBI's inability the fleet has come down to only seven planes.”

Rajnish Kumar, chairman at State Bank of India, the lead lender to Jet Airways, didn't respond do BloombergQuint's calls.

“It's a sad situation that the money is not being put in, something that was desperately needed by Jet Airways,” Jitender Bhargava, former executive director at state-run Air India, told BloombergQuint in an interview. “Don't think banks at this juncture can infuse funds. They can face consequences subsequently if they do a rush job.”

Bhargava, however, blamed founder Naresh Goyal, saying he delayed resignation from the board even after Etihad Airways put that condition to infuse fresh funds. “Even if there are one or two bidders who are interested, lenders should fast-track the process.”

Planes Up For Grabs

Santosh Hiredesai, aviation analyst at SBICAP Securities, expects Jet Airways' troubles to help SpiceJet to add more planes on lease to lift its market share. The struggling carrier had 84 Boeing 737-800 NG planes and lessors are entitled to take possession if not paid, he said, adding that usually for a lessor it is cost efficient to redeploy the aircraft in the same geography.

The Indian government has already asked Spicejet to consider taking over grounded Jet Airways' aircraft, Bloomberg reported.

SpiceJet is better placed than peers to lease Jet Airways' grounded aircraft as it's the only other airline that has a fleet of Boeing planes. More importantly, the airline would find it easier to induct trained pilots, said Hiredesai.

SpiceJet said it's adding 16 737 aircraft under a dry-lease arrangement. While the company has not publicly acknowledged it, these could be mostly likely be the ones re-possessed by lessors from Jet Airways.

The airline's Boeing-plane fleet could also make it easier for SpieceJet to absorb the Jet Airways' existing workforce—pilots, engineering and ground staff—and quickly deploy the planes to lock in slots. Generally, pilots are certified to fly a particular type of aircraft and it takes nearly six to eight months to get certified by the regulator to fly a different plane.