Industry

Why Ajay Singh of troubled SpiceJet seeks redemption in bankrupt Go First



SpiceJet promoter and chairman Ajay Singh is known as a turnaround man. Nearly 20 years ago, he bought an airline, ModiLuft, which had been dead for close to a decade, renamed it, and turned it into a successful low-cost carrier, SpiceJet. He sold most of his stake in SpiceJet in 2010 to media baron Kalanithi Maran’s Sun Group, and soon exited by selling the remaining stake too. In a few years, SpiceJet turned into a loss-making, debt-ridden, dying airline. Despite advice by friends to keep off, Ajay Singh again bought a stake in the airline, turned it around and put it on a path of sustained profitability. It wasn’t just his turnaround skills; he was lucky too, because the oil prices had crashed. Prices of air traffic fuel are a big factor behind the performance of an airline.

The turnaround itch?

Today, Ajay Singh is itching to perform another turnaround trick, and it seems he would need better luck this time. Jointly with EaseMyTrip co-founder Nishant Pitti’s Busy Bee Airways, he has submitted a bid for the grounded Go First airline. The bid is worth Rs 600 crore, of which Rs 250 crore will be paid immediately.

The Wadia family-owned Go First is India’s first commercial carrier to have voluntarily sought bankruptcy protection. The airline had filed for initiating voluntary insolvency proceedings at the NCLT on May 2, citing huge revenue losses. It blamed US aircraft engine maker Pratt & Whitney for supplying faulty engines that grounded nearly half its fleet of 56 planes. Go First suspended operations on May 3.

Ajay Singh’s turnaround act seems far tougher this time because his own airline, SpiceJet, is itself struggling financially. It recently laid off around 15 per cent of its workforce which was part of the turnaround and cost-cutting strategy, following the recent fund infusion which brought hope for the airline.

In December, the airline said it would raise fresh capital of Rs 2,250 crore, and next month it announced it had received the first tranche of Rs 744 crore as part of the total Rs 2,250 crore being mopped up through issuance of securities on a preferential basis. In 2023, the carrier flew 83.90 lakh passengers and had a domestic market share of 5.5 per cent. SpiceJet’s financial challenges include an arbitral award to former promoter Kalanithi Maran and KAL Airways as part of a 2018 ruling. “I firmly believe that Go First holds immense potential and can be revitalised to work in close synergy with SpiceJet, benefiting both carriers,” Ajay Singh has said. “Apart from coveted slots at domestic and international airports, international traffic rights, and an order for over 100 Airbus Neo planes, GoFirst is a trusted and valued brand among flyers. I am happy to contribute to the efforts aimed at reviving this popular airline and leveraging its strengths for mutual growth and success.”

The challenge before Ajay Singh

Ajay Singh is facing a hard time as SpiceJet hasn’t paid statutory dues to the government, is fighting multiple cases including against aircraft lessors, and owes Rs 250 crore to former promoter Kalanithi Maran.On Monday, the Supreme Court asked SpiceJet to clear its outstanding dues of $1.25 million by March 15 to Swiss financial services firm Credit Suisse in a $24 million payment dispute. It also asked Ajay Singh to be present before it on March 22, the next date of hearing. Noting media reports that SpiceJet was going to submit a bid for takeover of GoAir, the apex court observed: “Why don’t we take judicial notice of the newspaper reports that you’re planning to take over GoAir? You have that much of cushion and you won’t repay?”

To the Go First resolution professional (RP), Ajay Singh has disclosed his net worth as Rs 9,000 crore as of December 2023, ET has reported. According to BSE data, he holds over a 50% stake in SpiceJet, which is valued at around Rs 5,000 crore. His co-bidder Pitti, who owns a 28% stake in EaseMyTrip valued at around Rs 9,000 crore, has furnished his net worth as Rs 3,600 crore. Go First seems to be going cheap as a distressed asset. It has nearly two dozen planes in flying condition, domestic and international routes as well as prime airport slots, and a land parcel of around 94 acres which can be developed and could rake in around Rs 3,000 crore, ET has reported.

But turning around Go First may not be easy, especially given the fact that the promoter, Nusli Wadia, one of India’s most well-known entrepreneurs, gave up on it after noticing the hopeless financial situation and complex disputes. Ajay Singh’s challenges will include renegotiating with lessors of Go First which may not be easy given the legal cases going on abroad. The lessors were prevented from taking their planes out of India because of the NCLT moratorium.

The committee of creditors may not accept Ajay SIngh’s bid. An ET report says they might be better off selling Go First’s land parcel on their own with developmental rights, recouping over Rs 2,600 crore in capital that the airline owes them.

Ajay Singh’s best hope of turning Go First around will be to quickly restart it. But as with most bankrupt airlines with several legal cases going on in India as well as abroad, Go First too could take a lot of time to get off the ground.

A person close to Go First has told ET recently that Go First should not be seen as a fallback arrangement, wherein if something happens to SpiceJet, this becomes the main airline with a clean slate.

While trying to keep his own struggling airline steady, Ajay Singh, it seems, will need a lot of luck to turn around a distressed airline this time.

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