SpiceJet has deferred payments to vendors and government agencies even as it continues to renegotiate contracts in steps to limit the impact of COVID-19 disruption.
While announcing its first quarter results, the low-cost airline said it has renegotiated or is renegotiating “various operating contracts (including, in particular, contracts with aircraft lessors).”
Continuing on the contract with lessors, the company has also reassessed maintenance provisions (having regard to contractual obligations and current maintenance conditions), “based on the anticipated scale of operations in the immediate future.”
SpiceJet incurred a Q1 net loss of nearly Rs 600 crore. Its net worth, which was already negative, has further dipped to Rs 2,170 crore, as on June 30, 2020. In 2019, SpiceJet had a negative net worth of Rs 350 crore, which zoomed to Rs 1,579 crore in the 2020 financial year.
Also Read: SpiceJet Q1: Net worth dips further, return of 737 Max planes delayed
Faced with the precarious financial condition, the airline said it has “deferred payments to various parties, including vendors and its dues to statutory authorities.”
In April, Reuters reported that two lessors to SpiceJet were in talks to terminate contracts and repossess planes via mutually agreed deals with the airline over missed payments.
Later in July, Airports Authority of India had put SpiceJet on cash and carry mode, after the airline failed to clear its dues. In a cash and carry basis, the airline has to pay, on a daily basis, for using facilities provided in an airport. Usually, airlines make these payments monthly. These facilities include parking of aircraft, landing and luggage handling.
While the airline said it has accrued for additional liabilities, including penalties, because of non-payment, the company added: “it is not practically possible to determine the amount of all such costs or any penalties or other similar consequences resulting from contractual or regulatory non-compliance.”
Underlining the industry circumstances, Ajay Singh, Chairman and Managing Director, said: “This is the worst‐ever crisis to hit the aviation sector… Flight operations were suspended for the most part of the quarter and the partial resumption of flights initially and the weak demand thereafter was a reminder of the significant problems that this pandemic has resulted in.”