Two engine lessors pursuing SpiceJet (SG, Delhi International) over unpaid leases have rejected an offer by managing director and promoter Ajay Singh to pledge personal shares equivalent to USD2.5 million towards the discharge of the airline's liability. This follows the Delhi High Court last week saying it would only extend the payment deadline if SpiceJet's directors were willing to provide personal undertakings.

Team France 01 SAS and Sunbird France 02 SAS, two engine leasing special purpose vehicles, have been pursuing the carrier in the courts over lease arrears on three engines dating back several years. Last year, the lessors told the court that SpiceJet had not paid its bills for two years and, at the time, owed USD12.9 million. In addition, they asked the court for a restraining order, preventing the airline from using the engines. Since then, the matter has appeared before the courts numerous times, with several payment orders issued and SpiceJet ignoring them. The LCC continues to use the engines.

During an August 8 hearing, SpiceJet's counsel, Sandeep Sethi, told the court that taking the engines out of service would damage the airline's operations, impede revenues, and hinder its ongoing capital-raising efforts. He made another request to extend the payment deadline and provided the court with an affidavit containing a fresh payment plan. He said his client was confident it could settle the debt next month. However, Justice Manmeet Pritam Singh Arora said he would only do so if the directors provided personal guarantees.

“This company obviously does not have money,” India's Business Today outlet reported the judge as saying. “You’ve been repeatedly giving undertakings to the court. If you’re not in a position to pay, then you should ground these engines. If the company alone is liable and it has no money, then perhaps your directors should provide personal guarantees. Otherwise, it seems the directors themselves have no faith in the money coming in."

Sethi told the court he would need to get instructions from his client as to whether SpiceJet's directors would be willing to provide personal guarantees and details of assets to support those guarantees. The board includes managing director Ajay Singh, Shiwani Singh, Anurag Bhargava, Ajay Chhotelal Aggarwal, and Manoj Kumar.

"We want our engines back"

On August 12, Sethi was back in court with Singh's offer of his unencumbered shares, saying the court could order their immediate release if SpiceJet did not settle its debts by September 30, 2024. However, Raj Shekar Rao, counsel for the lessors, rejected the offer. According to an Economic Times report, he told the judge his client did not want shares in a company "whose existence is shaky."

"The pledge is not acceptable," Rao added. "We have given them a long leash. We want our engines back. We have been asking for disclosure of Singh’s assets since January. We can give them 15 days to return our three engines. They can take off the engines from the aircraft in a day and we can have the inspection of the engines so as to have clarity on the health of the engines." The matter returns to court on August 14.

The courtroom proceedings, one of many SpiceJet is facing, piles the pressure on the embattled LCC. This week, it narrowly avoided having to cancel its flights in and out of Mumbai International after failing to pay airport fees, an issue it described as a "minor financial matter." A series of flights to and from Dubai International was recently cancelled for the same reason.

The Economic Times is also reporting that SpiceJet has emailed some of its employees to tell them payment of their June salaries will be delayed due to "pressing operational financial commitments". The August 8 email, signed by flight operations vice president Virendra Malhotra, said the airline hoped to make the payments "shortly" as the company was seeking bridge funding to help stabilise cash flow. "Meanwhile, we at flight ops appreciate your support and patience and look forward to your unwavering cooperation," the letter reads.

Delays paying wages and meeting provident fund commitments have been a recurring problem at SpiceJet, which claims that 95% of employees did receive their June salaries on time and that the remainder would be paid in the next few days.

Late last month, the SpiceJet board approved an INR30 billion rupee (USD357 million) capital raising via an institutional placement to qualified institutional buyers. This followed the board backing a proposal in January to raise around INR22.5 billion (USD268 million), of which around INR10.6 billion (USD126 million) has been raised so far.