Supreme Court Upholds Grounding of SpiceJet’s Leased Engines Amid Financial Turmoil

In a significant ruling, the Supreme Court dismissed SpiceJet's appeal against a Delhi High Court order mandating the grounding of three leased engines from Team France 01 SAS and Sunbird France 02 SAS due to unpaid dues. The court's decision, delivered by a three-judge bench led by Chief Justice D.Y. Chandrachud, leaves the cash-strapped airline with no legal recourse to avoid compliance with the grounding order.

The court found that SpiceJet had violated a consent order with the lessors and was reluctant to interfere with the high court's decision. SpiceJet’s senior counsel, Amit Sibal, had requested additional time to ground the engines, citing the need for specialized equipment, but the Supreme Court advised the airline to seek relief from the Delhi High Court instead.

This ruling comes after SpiceJet's previous attempts to overturn a single-bench order that mandated the grounding of the engines by August 16, 2024. The high court had previously criticized the airline, emphasizing that it cannot use another's property without fulfilling its financial obligations.

With two of the three engines already grounded, SpiceJet claims that grounding the remaining engine will disrupt operations, potentially affecting two aircraft from its fleet of 21. Despite this, the airline asserted its commitment to maintaining seamless operations, even amid these challenges.

Following the Supreme Court's order, SpiceJet's shares fell by 3.5% to ₹65.99, highlighting the market's reaction to the ongoing uncertainty surrounding the airline's financial health. SpiceJet had reported a consolidated net profit of ₹158.2 crore for the June quarter, a decline from the previous year, and is currently under enhanced surveillance by the Directorate General of Civil Aviation (DGCA) due to flight cancellations and financial instability.

The airline's total liabilities reached ₹1,252 crore as of June, down from previous months, but it still struggles with outstanding payments exceeding $20 million to its lessors. To address these issues, SpiceJet plans to raise ₹3,000 crore through a qualified institutional placement (QIP) by September 30, 2024. Despite efforts to stabilize its finances, the lessors remain skeptical, expressing frustration over the airline's ongoing payment delays since December 2023.

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In light of these challenges, SpiceJet’s chairman Ajay Singh is poised to reduce his stake in the airline by more than 10% to raise the necessary funds while retaining his position as the largest shareholder.