Ishika Kumar, Pune
The Indian airline SpiceJet has recently revealed an overwhelming shortfall of over 355 crore Rs in unpaid dues, including tax deducted at source (TDS)and provident fund (PF) contributions, which stretch from April 2020 to August 2023. The destitute airline is battling severe financial distress, it has disclosed these details in a preliminary placement document (PPD) submitted to the Bombay Stock Exchange (BSE) on 17th September 2024. This revelation comes as the airline struggles to navigate and resolve its financial and legal challenges.
According to the PPD filed, SpiceJet owes about 220 crore Rs in unpaid TDS deducted from the employees’ salaries but not remitted to the authorities. In addition, the airline has also failed to salaries 135.3 crore Rs in PF contributions, all during the same period. The situation has worsened by unresolved disputes amounting to 72 crore Rs in TDS from previous assessment years, spanning from 2009 to 2010 to 2013 to 2014, and pending GST liabilities totalling 84.5 crore Rs, covering the period from July 2017 to March 2019. The company has also reported substantial customs and goods and service tax dues, which remain contested.
Faced with these financial difficulties, the airline has grounded 36 of its 64 aircraft, citing “alleged default” in payments to lessors and a lack of necessary maintenance and spare parts. This has severely impacted its operational capacity, with less than 20 aircraft in service. The PPD’s statement stated; “We have been in an alleged default under the law and several aircraft lease agreements have led to the grounding of a major part of our fleet. This has triggered legal or enforcement proceedings, including actions under the Insolvency and Bankruptcy Code of 2016, from aircraft lessors and other vendors,”. SpiceJet’s troubles have led to over 25 pending legal cases and disputes under the same, to enforce that the bank guarantees and repossess the aircraft.
In a bid to stabilise its finances and address these obligations, SpiceJet has launched a Qualified Institutional Placement (QIP) to raise 3,000 crore Rs. First and foremost the funds shall be allocated to pay back the 601.5 crore Rs in overdue taxes, and employee contributions. Along with settling the 750 crore Rs of debts to creditors, including aircraft lessors and engineering vendors. The QIP proposal has been approved by Yes Bank, and the airline now awaits the same from Indian Bank and ICICI Bank.
Despite its efforts, SpiceJet’s future remains uncertain. The airline’s market share has dwindled to below 4%, a significant drop from its peak after the collapse of Jet Airways when it could grow. With rising fuel costs, extended pandemic-related disruptions post the pandemic, and the global grounding of Boeing 737 Max aircraft further complicating its recovery. SpiceJet continues to face the tumultuous winds to regain its stability and market position.