It all started on February 7, 2019, when in a BSE filling Jet Airways mentioned that lessors had grounded 4 aircraft due to non-payment of dues for months. And then everything started falling apart. Schedules went haywire as lessors grounded more aircraft. Mass cancellations of flights occurred and are still occurring with international routes affected now, even on widebody aircraft.
As of today, 47 aircraft are grounded by lessors according to BSE filings. The number is way higher, once you count the ATR and the widebody fleet. In a meeting with DGCA, Jet Airways mentioned that they would operate limited flights with limited aircraft.
Adding to this situation, all Boeing Max aircraft are grounded across the world following Ethiopian Airlines 737 Max crash. This has increased the demand for 737/NG aircraft across the globe as airlines are struggling to maintain published schedules. SpiceJet which has 13 Boeing 737 MAX aircraft is also affected.
For now, SpiceJet has increased the utilisation of their Boeing 737NG and Q400 Dash 8 fleet. In addition to this, SpiceJet has also wet-leased two Boeing 737NG aircraft from Corendon Airlines for time being. TC-TJS and TC-TJU are currently operating on behalf of SpiceJet.
I would like to note that TC-TJS started operating on behalf of SpiceJet from March 13, 2019, but TC-TJU has been operating for SpiceJet since November 2017. SpiceJet has been wet leasing Boeing 737NG from Cordean Airlines for years. TC-TJS flew for SpiceJet from November 2017 to May 2018.
But just one additional aircraft and increasing aircraft utilisation cannot cover for 12 grounded Boeing 737 Max. SpiceJet is also forced to cancel many flights.
Amidst all this, lessors of Jet Airways grounded 737s have approached SpiceJet with a plan. Lessors are willing to offer almost all the 50 Boeing 737NG aircraft, which are currently at various airstrips in India, to SpiceJet according to reports.
Ideally, this can be a win-win situation for both. Lessors want their aircraft to fly as they won’t make money on the ground and Jet Airways ain’t got cash to pay them. SpiceJet wants aircraft to maintain their schedule in light of 737 Max groundings. Apparently, lessors are willing to dry lease up to 50 737NG aircraft to SpiceJet for a period of 3 years.
With the demand increasing for 737NG, lease rentals have also increased by more than 10%. It was around USD 200,000-250,000 per month. We don’t know what rental rates have been offered to SpiceJet though. Lessors may be considering giving a slight haircut to save themselves from regulatory troubles.
Well, it isn’t easy as it looks on paper for lessors to repossess aircraft and fly them out of the country but times may have changed since Kingfisher days when lessors had trouble repossessing aircraft. It may take up to 60 days for aircraft to be cleared and dry leased to SpiceJet if there is a deal in making.
Personally speaking, there is no chance that SpiceJet will be able to absorb 50 aircraft in one go. They may go for 20-25 aircraft but 50 is a bit far fetched. SpiceJet is also isn’t in the best of financial health currently. They even lack the manpower to be able to expand their fleet by 50 more aircraft in such a short period of time.
Even if they recruit Jet Airways crew, for them to absorb a huge number of aircraft and manpower would be a disaster. They posted a huge loss in Q2 FY19 and a modest profit in Q3 FY19. Last October, SpiceJet sought a three month extension period for lease payment from one lessor due to liquidity crisis caused by delay in the delivery of the 737 MAX.
What causes a bit of validation to this is the fact that SpiceJet officials themselves are posting on social media the report that they have been approached to take over these aircraft.
Let’s see how many grounded Jet Airways make their way to SpiceJet, or if they even do. Let’s hope Jet Airways finds a new bankroller soon so that the grounded aircraft are back in operation. What if they find a middle ground and we see SpiceJet wet leasing Jet Airways grounded 737s? Maybe Air India Express is also interested in taking some 737NG on dry lease, you never know.
Will SpiceJet take Jet Airways’ grounded 737 NG? How many do you think will they lease?