Bailout Hopes Dashed, SpiceJet Seeks Buyout

Covid-19 has the Aviation Industry in its claws. India’s SpiceJet Airlines is next in the series after Virgin Australia that is looking for a buyout to continue its operations after no direct aid was provided under the ‘Atmanirbhar Bharat’ package.
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Crux of the Matter

Hard Landing For SpiceJet
Due to lockdown, airlines are facing a huge slump in demand and most of the fleet of planes are grounded. As revenues have stopped, airlines across the world are on the verge of bankruptcy. India’s SpiceJet is one such airline and is now looking for a buyout after the government did not offer any bailout. The net worth of the company has gone down to negative ₹850 crores. Further uncertainty over the extension of lockdown is a serious problem for airlines.

While SpiceJet is facing hardships, IndiGo Airlines has been able to sustain itself with the free cash of ₹9,412.8 crores. As per the latest guidelines from the Indian government, all commercial flights have been suspended till 31st May. IndiGo, SpiceJet, GoAir have started taking bookings for international flights in June.

Where Is The Government?
Indian Government has declared no direct aid to Airlines in the Atmanirbhar package.
However, it has opened military airspace routes for commercial planes. This move will save fuel and time of commercial airlines. This gain is in a way compensation for the losses of lockdown. The remaining profit will help in reducing the flight ticket prices.

Moreover, the government has initiated the process of making India a global hub of the Aviation Industry. Under this initiative aircraft maintenance, repair and overhaul will become cheap and easily accessible for Indian Airlines in the longer run. Recently, the government put debt-ridden government-owned Air India’s 100% stake on sale.

Global Scenario
The Global Aviation industry is facing a very tough time due to the pandemic. It is estimated that by ending of May 2020, most of the Airlines in the world will be on the verge of bankruptcy. One of the world’s oldest airlines, Avianca Airlines of Columbia filed for bankruptcy. Even Virgin Australia is looking for a buyer.

On the other hand, the US has bailed out commercial airline players with a support package of $25 billion. The national interest of nations over cooperation is a major threat to the aviation industry. Global Aviation Industry is likely to face a loss of $314 billion in revenue.

  • The origins of SpiceJet can be traced back to March 1984 when the company was established by Indian industrialist S. K. Modi to provide private air taxi services. On 17 February 1993, the company was named as MG Express. In 2004, the company was acquired by Ajay Singh and the airline planned to restart operations as SpiceJet following the low-cost model.
  • Avianca Airlines, the second oldest functioning airline of the world from Colombia, has filed for bankruptcy following loss due to worldwide Covid-19 lockdown. Avianca airlines was founded in 1919.
  • In June 2015, the airline unveiled its current logo with a new tagline ‘Red. Hot. Spicy.’ SpiceJet names all its aircraft with the name of Indian spice.