SpiceJet Miles From Glory

February 04, 2025 • Estimated Reading Time: 12 minutes

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In today’s edition — why India’s budget carrier SpiceJet’s struggles are far from over; Investors looking for a cue from the Reserve Bank of India; and a silver lining for India from Donald Trump’s tariff clouds? 

DECODE THE NEWS

SpiceJet Inches Ahead, Miles From Former Glory

What? 

Earlier in January struggling budget airline SpiceJet announced its plan to re-induct its grounded Boeing 737 MAX aircraft into operations. By April this year, the airline wants to unground 10 aircraft and bring them back into their fleet. SpiceJet chairman and MD Ajay Singh called it a reflection of SpiceJet's unwavering commitment to growth. 

This is a step in a series of efforts the airline is taking to keep itself afloat. But will it work?

“SpiceJet is at risk of being edged out of the market if it doesn't keep up with competitors, as its market share has dwindled to an almost insignificant level. Strengthening their fleet and operations is crucial to reclaiming market share, which is vital for their long-term survival,” J Krishnan, Former President and Board of Advisors at The Air Cargo Agents Association of India (ACAAI) told The Core.

Launched in 2005 as a popular low-cost carrier, SpiceJet has faced years of turbulence with grounded aircraft, lessor disputes, financial struggles, mounting debts, and a shrinking market share.

A significant hurdle for SpiceJet has been its legal disputes, led by payment delays that caused conflicts with aircraft lessors. In October 2024, the airline resolved a $23.39 million dispute with lessors Aircastle and Wilmington Trust, agreeing to pay $5 million. 

India’s aviation industry suffered tremendous losses during the pandemic, and while some like GoFirst failed to recover, SpiceJet trudges on. However, troubles for the airline had started long before the pandemic. 

Amid a series of financial challenges, the airline's ungrounding of aircraft was a significant step forward. Last week, the airline's share prices rose as much as 4% on the news of the reintroduction of flights, even as it raised funds to pay off its dues over the past year. 

Signs Of Recovery 

The resolution in October followed a similar settlement with BBAM, a US-based aircraft leasing firm, in October 2024. These legal resolutions have provided a much-needed sense of stability for the airline’s operations.

“A key factor in their turnaround seems to be resolving disputes with lessors, bringing much-needed stability. With these agreements in place, there is now a level of certainty that operational disruptions will be avoided, which likely played a significant role in driving their recent decisions,” Krishnan added. 

SpiceJet’s also saw an overwhelming response to its Qualified Institutional Placement (QIP) in September 2024. The airline raised an impressive Rs 3,000 crore through the placement, which opened on September 16 and closed on September 18. 

The success of the QIP demonstrates investor confidence in SpiceJet’s potential for growth despite its financial struggles. 

“Currently, SpiceJet’s operations may not be entirely stable, but there’s noticeable progress. Rs 3000 crore is a mix of dilution which was done by Ajay Singh on his personal level and some were from the equity investors,” S Hari, CEO, OneAvia services and industry expert told The Core.

As of January 2025, SpiceJet operates approximately 250 daily flights to 48 destinations within India and to international destinations, including 32 new flights for the winter schedule. In November 2024, the airline expanded its domestic network by launching eight new flights connecting Jaipur with Varanasi, Amritsar, and Ahmedabad, as well as linking Ahmedabad with Pune.

The airline faced challenges in maintaining its fleet size. In March 2024, SpiceJet's operational fleet comprised 39 planes, while the total fleet size stood at 63. By August 2024, the operational fleet had reduced to 21 aircraft.

“When SpiceJet was facing a severe financial crunch, its aircraft were grounded, and engine replacements were stalled. These issues highlighted the need for a robust balance sheet and a solid funding mechanism. Without these, the airline struggled to maintain operations. Additionally, when aircraft are grounded, lessors and suppliers often withhold equipment, further compounding the delays,” Hari added. 

While these may be a step in the right direction, SpiceJet has a long way to go on its flight to recovery. 

PODCAST

On Episode 498 of The Core Report, financial journalist Govindraj Ethiraj talks to Kunal Sodhani, Vice President, Shinhan Bank as well as Ajay Rotti, Founder and CEO of Tax Compass .

  1. Trump tariff shocks hit Indian markets.

  2. The rupee takes a sharp knock as the dollar surges.

  3. The new oil routes that could kick in on Canada and Mexico tariffs. Could India benefit?

  4. The Income Tax Department admits it was adversarial earlier but will now move to trust.

  5. Signs of policy consistency and certainty in the Union Budget, including in  transfer pricing. 

MESSAGE FROM INDIA ENERGY WEEK 2025

India Energy Week 2025 will bring together global energy leaders to explore pressing challenges, showcase India's energy transition, and highlight innovative solutions.

The conference is scheduled from February 11-14, 2025, in New Delhi.

CO:RELATION

Markets Hold Ground Post-Budget 2025

When there is risk in financial markets, trillions of rupees or dollars make rapid moves. On Monday, there was a sharp selloff in Taiwan, Korea and Japan equities. Benchmark indices were down 2-3%. Indian shares opened weak and traded marginally below their previous close. Foreigners continued to sell on Saturday as well as on Monday. The bond market is the most sensitive market if the government finances are not in order. After hearing finance minister Nirmala Sitharaman’s Budget speech, they had enough time over the weekend to react on Monday morning. The 10-year bond yield rose marginally to the level it had reached in the middle of January 2025. It does not indicate any negative sentiment due to the Budget proposals. 

Sophisticated investors in the bond market think that the government’s Budget estimates are believable. In the equity markets, there is no euphoria in the consumer stocks following a tax relief. However, shares of auto companies and banks remained relatively flat. There was a spike in consumer tech companies like Zomato, Swiggy and One97 Communication (Paytm). Shares of consumer durable companies like Whirlpool of India and Havells India witnessed gains too. Investors expect the middle class to spend on consumption. Investors could now look for a cue from the Reserve Bank of India that announces credit policy on Friday.

CORE NUMBER

57.7

This is the PMI reported for January 2025, rising from a 12-month low of 56.4 in December, Business Standard reported. The surge was driven by strong domestic demand and export orders, which grew at the fastest pace in nearly 14 years, according to HSBC and S&P Global. While cost pressures eased to an 11-month low, selling prices continued to rise amid sustained demand. Notably, job creation in the manufacturing sector reached its highest level in nearly 20 years. However, HSBC economists cautioned that rising output prices and global uncertainties could temper future growth in India’s manufacturing sector.

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FROM THE PERIPHERY

—🏳 Even as Trump continues to dominate news headlines with his policies and tariffs, India is treading a cautious path and trying to make all the right noises. In his post budget interactions, finance Secretary Tuhin Kanta Pandey told Reuters that India does not want to come across as protectionist. “Our stance is that we don't want to increase protection,” Pandey said. This comes even as India has earlier said it will import more from the US. India’s budget, however, has stopped short of taking any steps that would protect industry if Trump were to slap tariffs on the country. 

—👗 The Trump administration’s latest tariffs on China, Mexico and Canada could bolster India’s textile and apparel exports to the US, which currently hold a 28% share. With China’s apparel exports to the US declining — dropping from 37.7% in 2013 to 21.3% in 2023 — global brands are diversifying their supply chains. India’s vertically integrated textile industry, skilled workforce, and robust infrastructure position it as a strong alternative. Experts from Elara Securities predict home textiles and garments growth as brands shift sourcing strategies, reinforcing India’s role as a key global supplier.

—✈️ Jewar International Airport in Uttar Pradesh, set to be Asia’s largest, will begin operations in April. A validation flight was conducted in December, and the project remains on schedule, according to Business Standard. Minister for Civil Aviation Kinjarapu Rammohan Naidu told the parliament that airlines such as Air India and IndiGo are preparing to launch services from the airport. Additionally, finance minister Nirmala Sitharaman in the Union Budget on Saturday announced plans to develop 100 more airports across the country to expand air travel infrastructure.

—🤔 India is reconsidering its participation in a global corporate tax deal after Trump withdrew from the agreement, effectively removing the United States—one of the biggest global economies—from the framework. The 2021 deal, signed by 140 nations under the Organisation for Economic Cooperation and Development (OECD), aimed to set a minimum corporate tax rate of 15% worldwide to prevent multinational companies from shifting profits to low-tax countries. The withdrawal of the US creates uncertainty about the agreement's effectiveness since a major economy like the US leaving the deal creates uncertainty around the framework, Reuters reported on Monday. 

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👥 THE TEAM

✍️ Zinal Dedhia, Salman SH | ✂️ Rohini Chatterji | 🎧 Joshua Thomas