Shares of budget airline SpiceJet Ltd surged as high as 11.28% after the company’s chairman and managing director Ajay Singh announced a joint bid for bankrupt airline GoFirst. The bid has been submitted by Ajay Singh, in his capacity, along with Busy Bee Airways Private Ltd.
"Ajay Singh, chairman, and managing director of SpiceJet, and Busy Bee Airways Private Ltd, have jointly submitted a bid for GoFirst," the company says in a statement.
Wadia group-owned GoFirst, which has been grounded since May 2023, slid into bankruptcy due to financial woes. As per SpiceJet, the bid for GoFirst, submitted on Friday (February 16, 2024), is a “strategic move”. It claims the move has the potential to "reshape the landscape of the Indian aviation sector and position SpiceJet for substantial growth in the industry".
The company says SpiceJet's role as the operating partner for the new airline involves providing essential staff, services, and industry expertise. "This collaboration is anticipated to generate synergies between the two carriers, leading to improved cost management, revenue growth, and a strengthened market position within the Indian aviation industry."
For SpiceJet, which will serve as the service provider, it presents significant opportunities for "revenue expansion". "By leveraging its established infrastructure and operational capabilities, SpiceJet can optimise resource allocation and achieve cost efficiencies across various functions, including maintenance, ground handling, and engineering."
Furthermore, SpiceJet says the coordinated route planning initiatives could help it enhance passenger traffic and drive ticket sales for both airlines. "By aligning flight schedules and destinations, SpiceJet and the new airline can capture a larger share of the market and cater to diverse passenger needs effectively."
Notably, under its revival plan, SpiceJet has completed the first tranche of capital infusion amounting to ₹744 crore, with additional subscriptions pending regulatory approval. The company says it has also initiated the process to raise an additional ₹1,000 crore. The carrier says it already holds valid shareholder approval to raise up to ₹2,500 crore through qualified institutional placement (QIP).
The share of SpiceJet opened up today and surged to an intra-day high of ₹72.29 before settling at ₹70.81, up 11.28% on the BSE. The stock is currently down 8.6% from its 52-week high of ₹77.50 touched on February 5, 2024. At the current share price, SpiceJet's m-cap stands at ₹4,845.80 crore.
As per a report, two other entities - Sharjah-based Sky One company and Africa-focused Safrik Investments - have also expressed interest in buying the beleaguered carrier Go First. As of March 2023, GoFirst’s debt stood at ₹3,513 crore, while its cumulative losses rose to ₹4,543 crore in the past four years.
SpiceJet, meanwhile, has also announced to implement cost-cutting measures, including laying off around 1,000 employees. The move, it says, will save up to ₹100 crore for the company. Ajay Singh-led SpiceJet has a total employee strength of around 9,000. The current churning is said to be somewhere 10-15%.
