SpiceJet: Another Kingfisher in making?

SpiceJet: Another Kingfisher in making?

The aviation industry, SpiceJet employees, common public and the government bodies have started comparing SpiceJet with Kingfisher. Many of the participants believe that financial situation of SpiceJet is indeed very alarming. The aviation industry has always remained a tough and challenging industry. It has to deal with the internal as well as external variables. So, let us share our views on the topic- SpiceJet: Another Kingfisher in making?

Yes

• Although SpiceJet is a low-cost carrier yet it is showing the same problems as faced by Kingfisher in its early problem days. The employees have not received allowances and even the foreign travel allowances are on decline.

• SpiceJet hasn’t deposited TDS and it is the first signal of a serious financial problem in any company. It was the same case with airline Kingfisher.

• SpiceJet posted a huge loss of $170 million in fiscal 2013, and if it continues it won’t be able to survive in the competitive industry.

• When the crisis of KFA started, the airline first compromised on equipment list, and it is the same case with SpiceJet where the spare parts are minimized compromising safety.

• SpiceJet has still a pending order of 42 Boeing 737s worth $4.3 billion, and any financial mess will force it to cut pending order.

No

• The financial woes in SpiceJet have not worsened so much that salaries have become an issue. The airline is meeting its payroll obligations on time.

• Most of the problems for SpiceJet are due to the weakening rupee that declined against the dollar late last year. However, under new government, things are expected to change soon.

• The most important factor for any airline company is crude oil, and SpiceJet is set to benefit from plummeting crude oil prices.

• The airline company is ready to pay interest or penalties that will incur on personal tax filings of employees, once the matter with tax department is resolved.

• SpiceJet is smartly launching new deep discount plans for the customers to generate cash for fulfilling its working capital requirements.

Conclusion

All the companies face one or other financial problems at some point of time. However, it depends on the management how it deals with the financial woes. Does the management take steps to solve the problem or mismanages worsening the problems? There is no denial that SpiceJet is showing similar signs as that of Kingfisher but it has other positive factors it can use for improving the financial conditions.