While sources indicated that SpiceJet returned the aircraft on account of a cash-crunch, a company spokesperson denied the financial situation as a factor and said the carrier did not need the aircraft due to the trimmed operations.
In what is being pegged as the first real impact of curtailed operations on Indian airlines, low-cost carrier SpiceJet has returned five of its wet-leased Boeing 737 aircraft to Turkey’s Corendon Airlines. While sources indicated that SpiceJet returned the aircraft on account of a cash-crunch, a company spokesperson denied the financial situation as a factor and said the carrier did not need the aircraft due to the trimmed operations.
Meanwhile, aviation consultancy firm CAPA India in a research note on Wednesday said the impact of COVID-19 will be “so severe that even the stronger carriers may not be immune”. “In the event of a three-month shutdown, the two listed carriers alone — IndiGo and SpiceJet — could report combined losses of $1.25-1.50 billion across 4QFY2020 and 1QFY2021. IndiGo’s hitherto enviable free cash reserves may almost be wiped out. Smaller carriers may exit,” CAPA noted.
Responding to queries by The Indian Express, a SpiceJet spokesperson said: “The suspension of international operations and the weakening of domestic demand due to COVID-19 outbreak earlier this month provided an opportunity to SpiceJet to cut high-cost expenses and focus our resources on running a lean and profitable operation. As part of the cost cutting exercise, wide-ranging measures have been taken including returning some wet-lease aircraft”.
“Lease payments are made in advance for these aircraft and the lessors have some payables to SpiceJet … some aircraft were returned due to weakening demand and closure of international operations due to COVID-19. Had this not happened, we would have been operating these planes,” the person said.
SpiceJet’s rival GoAir, too, in an effort to cut costs, has extended salary cuts to all its employees for March. “We will ensure that the lowest pay grades suffer the least … when the tide turns once again, and it will, GoAir will find a way to compensate all of you for the sacrifice you are being asked to make at this juncture,” its CEO Vinay Dube said in a communication to employees.
Even as airlines suffer the pain of severely subdued demand, airports are also in the line of fire, and are expected to see a considerable fall in passenger throughput. “Given the fall in airline operations, airports are likely to operate at less than 20% capacity for the month of April and less than 50% till June. Decline anywhere between 8% to 15% is expected for passengers handled (domestic and international) by airports,” CARE Ratings said in a report.
On account of the sharp decline in passenger and aircraft traffic at Delhi Airport, Moody’s Investors Service has placed GMR Hyderabad International Airport Limited’s Ba1 Corporate Family Rating on review for possible downgrade, even as it downgraded Delhi International Airport Limited’s (DIAL) CFR and senior secured ratings to Ba3 from Ba2.
Spencer Ng, vice president and senior analyst, Moody’s, said, “The downgrade to Ba3 reflects our expectation of a sharp decline in passenger and aircraft traffic at Delhi airport in the coming months and the uncertainty over the timing and extent of a recovery, which coincides with increased debt issuance as the airport enters the peak stage of its Rs 98 billion expansion project.”
Even as the current scenario was full of uncertainty, Moody’s expects a recovery in airport traffic to commence in the second half of the year. However, it expects Delhi airport’s traffic levels for the next two-three years to be lower as a result of the coronavirus, which will reduce DIAL’s available cash flow for its Rs 9,800 crore expansion project and increase its reliance on debt funding. “The rating action reflects the expectation of a sharp decline in passenger and aircraft traffic at Hyderabad airport in the coming months and the uncertainty over the timing and extent of a recovery, which coincides with increased debt issuance as the airport enters the peak stage of its Rs 5,500 crore expansion project,” Ng said.
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