SpiceJet Will Recieve Another Cash Injection Soon

Source: SpiceJet

This is very, very good news for SpiceJet. Right now, 5 of 6 Indian carriers are losing money. They are having difficulty finding new investors. Air India and Kingfisher both are not eligible for additional loans from banks until more investment is made in the companies from a private source. Vijay Mallya has been very unwilling to support the airline, worrying (quite rightfully) that he will be throwing good money after bad.

 

SpiceJet 737-800; Source: Wikimedia

Unlike Mallya, this move by Maran shows that what he is saying is not just talk. By spending more money on the airline, Maran is showing his confidence in the airline, and helping it out through tough times.

SpiceJet is adding 3 Boeing 737s and 8 Bombardier Dash-8 Q400s this year. This expansion is very expensive, and Maran is helping fund it. In order for SpiceJet to see larger profits, the airline must expand further into it’s regional niches that it has created. Having monetary support for this expansion is very helpful for SpiceJet.

 

SpiceJet Q400; Source; Wikimedia

In addition, SpiceJet has been losing money recently. Vinay Bhaskara did a great job analyzing the financial results in detail, which you can read here

. The new injection will allow SpiceJet to fund these losses. Maran funding the losses is a very clear way of saying that he is committed to SpiceJet and confident that the airline’s results will improve in the long run. This gives management, labor, lenders, the government, and pretty much everyone else great confidence that SpiceJet will not be going anywhere soon. At a time when everyone is anxiously waiting for Kingfisher to announce that they are suspending operations, this confidence is important. Hopefully, SpiceJet will continue to see success in the future.