Low-cost airline SpiceJet’s net worth has fallen further, prompting its auditor to doubt the airline’s ability to be a going concern.
The airline, which posted a net loss of Rs 593 crore in the first quarter of the current financial year, had a negative net worth of Rs 2,170 crore, as on June 30, 2020.
In 2019, SpiceJet had a negative net worth of Rs 350 crore. This zoomed to Rs 1,579 crore in the 2020 financial year.
Just like in the fourth quarter, the fall in net worth has prompted the airline’s auditor to underline the precarious condition. These conditions, auditor S. R. Batliboi & Associates LLP said, “indicate the existence of a material uncertainty that may cast significant doubt about the company’s ability to continue as a going concern.”
In the last financial year, the airline reported a net loss of Rs 934.8, higher than the Rs 302 crore it incurred in FY19.
For the first quarter of FY21, the auditor further noted that if not for the other income, of Rs 141.34 crore, the company’s losses would have been higher.
Delays in Max planes
Much of the other income has come from what it expects as claims, from aircraft manufacturer Boeing for the grounding of the 737 Max planes.
“The company has initiated the process of claims on the aircraft manufacturer towards the cost and losses, which are currently under discussion,” SpiceJet said.
“Consequently, and without in any manner limiting or prejudicing the legal and the commercial rights of the company towards its claim in this regard, certain costs (including, inter alia, aircraft and supplemental lease rentals and certain other identified expenses relating to the Boeing 737 MAX aircraft) aggregating Rs 140 crore for the quarter June 30, 2020, have been recognised as other income,” it added.
The same was Rs 134 in the fourth quarter of FY20, and Rs 141 crore for the year-ago period, ending June 30, 2019. For the whole of FY20, the number was Rs 671 crore. The adjustment has also led to a ‘related foreign exchange gain on the restatement of these balances,’ amounting to Rs 1.2 crore.
Boeing was forced to ground its bestselling 737 Max aircraft in March 2019, after twin air crashes involving the plane led to the death of over 300 fliers.
Among Indian carriers, apart from SpiceJet, Jet Airways had also placed orders for the aircraft.
Interestingly, the airline expects further delay in the return of the aircraft. In July, while announcing the Q4 and FY20 results, SpiceJet said it expected the grounded Boeing 737 Max aircraft to get back to service in the first three months of 2021. But in its statement on September 15, the airline said, the aircraft is “likely return to service of the MAX in the fourth quarter of FY2021.”