SpiceJet Can’t Pay at the Pump

SpiceJet, the debt-ridden Indian airline, had to cancel flights Wednesday morning because fuel companies refused to top off the tank.

The SpiceJet website says that the cancelations are due to “operational reasons.” But it is no secret that the grounded planes are a result of their financial problems.

In their struggle to make ends meet, SpiceJet has had to buy a lot of fuel on credit. And according to The Wall Street Journal, SpiceJet owes 140 million rupees ($2.2 million) to fuel companies.

In the low-cost airline industry where competition is fierce, this is a big number.

SpiceJet is still one of the biggest airlines in the country and its collapse would have serious economic repercussions.  For this reason, the Indian government has asked for fuel companies to be patient with the struggling airline.  The BBC reports that,

On Tuesday, civil aviation authorities gave SpiceJet a reprieve when they said state-owned oil companies would be asked to give credit to the cash-strapped airline for up to 15 days.

The civil aviation ministry also said that banks or other financial institutions would be asked to lend up to $94m (£60m), backed by a personal guarantee of SpiceJet chairman Kalanithi Maran, a well-known media businessman.

Luckily for the passengers whose flights were canceled, fuel companies started fueling the planes by the afternoon.  But this was only after SpiceJet paid for the gas in cash.

Times are hard for SpiceJet. Now they have to refund this morning’s flights and deal with the corresponding drop in stock price. Relatively speaking, these are only minor challenges compared to the airline’s total debt of about $314 million.  It appears that SpiceJet will be in the red for a while.

 

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