Is loss-ridden SpiceJet going Kingfisher way?

NEW DELHI/MUMBAI: SpiceJet employees are a nervous lot these days. The loss-ridden low cost carrier (LCC) deducted tax from their salaries but has neither given a TDS certificate, nor Form 16 so far — raising questions if the same has indeed been deposited with the government. With the last date of filing tax return for fiscal 2013-14 just three days away, employees are sending frantic mails to the management but have not got any response from the airline so far.
"No one seems to know what’s happening in the airline as we have not got even a response or acknowledgement to our repeated mails to HR asking for Form 16. Pilots get a separate foreign travel allowance, which is Rs 1.2 lakh for captains and Rs 80,000 for co-pilots, in April. This year even that money has not come," said an employee. Incidentally, you cannot file a tax return without the Form 16.

Default on tax deposit is usually the first signs of a serious financial crisis in any corporate, which showed up when another airline Kingfisher, started its downward spiral. With the memories of Vijay Mallya’s failed airline still fresh, SpiceJet employees are now worried about their airline’s future.
SpiceJet did not comment on this issue till the time of going to press. A SpiceJet insider, however, insisted their airline is not going the Kingfisher way. "There was an IT glitch which led to employees not getting their TDS forms. This issue was to be resolved by last Friday and will definitely be sorted out on Monday," the source said.
SpiceJet is owned by Kalanithi Maran's Sun Group with the promoter holding 53.48% stake in the airline through his personal holding and through Kal Airways Pvt Ltd.
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Since the beginning of this year, SpiceJet has been regularly coming out with deep discount schemes in a bid to raise cash for meeting its working capital requirements. What's more it has met with good success as well. For the month of June, the airline posted the largest increase in market share on the back of these fare discounts. The low-fare airline added 1.1 % points to its market share over May to 19%, to take the number three spot pipping Air India in the process. The two others ahead of SpiceJet are Indigo with 31.6% share and the Jet Air-Jet Lite combine with 19.6% share. In effect it is within striking distance of the number two spot.
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Centre for Asia Pacific Aviation (CAPA) India head Kapil Kaul said: "We estimate SpiceJet requires about $ 250 million as of March, 2014, to bring its books in order. It may require further fund infusion for growth and expansion. Raising capital in next one to three months is critical. The LCC’s restructuring efforts are not showing results largely due to very complex competitive dynamics. We expect a significant downsizing post a possible fund infusion."

Though many airlines have entered the Indian aviation space lately but most existing players are struggling financially. SpiceJet’s monetary woes are peaking at a time when the directorate general of civil aviation (DGCA) is conducting a financial audit of all Indian carriers. The last such audit in 2011-end had revealed "major financial distress" in two airlines — Kingfisher (which got grounded in October, 2012) and Air India Express. The last audit report had said that "a reasonable case exists for withdrawal of their (Kingfisher’s) airline operator permit (read licence) as their financial stress is likely to impinge on safety." Results of DGCA’s ongoing financial audit is now awaited.
It was originally started by S K Modi as Modiluft, which ceased operation in 1996, and was later renamed Royal Airways. In 2004 the management was taken over by Sanjay Malhotra and AjaySingh, who renamed the company and restarted operations. In 2008 Wilbur Ross made an investment in the airline, followed in 2010 by Kalanidhi Maran acquiring a 37.7% stake.
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