Spicejet expects to resolve settlement disputes with lessors shortly

Budget carrier SpiceJetBSE -0.92 % today said it is negotiating with its aircraft lessors, who have dragged it into litigation over default on rents, to resolve the issue amicably, a day after the Delhi High Court directed aviation regulator DGCA to deregister the airline's six Boeing 737-800s.

The airline has reached in-principle understanding with one of the two lessors already, and is in advanced discussions with the other lessor, SpiceJet said in a statement.

In a severe blow to the airline, which is still in the revival process, the Court had yesterday ordered the Directorate General of Civil Aviation to deregister six of SpiceJet's Boeing 737 planes, following the termination of lease agreements by the leasing companies, AWAS Ireland Ltd and Wilmington Trust SP Services (Dublin) Ltd.

Justice Rajiv Shakdher directed the DGCA to "forthwith" deregister the aircraft saying once the creditors fulfilled the conditions prescribed in Aircraft Rules, the aviation regulator was "mandatorily required to cancel registration".

An airline cannot operate an aircraft once it is deregistered by aviation regulator DGCA. "In parallel with the court proceedings, discussions have been ongoing with the lessors for an amicable settlement. SpiceJet fully expects the matter will be resolved shortly and positively with the lessors, and there will be no grounding of aircraft or disruption of operations," the airline said.

The airline said these cases originated when it was in financial crisis in December last year, before change of ownership and infusion of fresh funding. The airline, in the statement, also said that it was exploring all legal remedies to safeguard its interest to maintain continuity of operations.

The court had said the petitioner companies, AWAS Ireland Ltd and Wilmington Trust SP Services (Dublin) Ltd, had fulfilled the conditions stipulated in the Rules, and therefore, the DGCA had no discretion in the matter. The court also said it "cannot interdict the process of deregistration on the nebulous ground of equity as it would be contrary to the provisions of the Cape Town Convention and Protocol, to which, India is a party."

The Cape Town Convention provides better protection to aircraft lessors and banks. In the statement, SpiceJet said, "The change of ownership and infusion of fresh funding has assured SpiceJet's future, and our creditors are aware and appreciative that the best outcome for all parties would be a fully revived and healthy airline."

As part of the airline's revival plan, the erstwhile promoter Maran family transferred its entire 58.46 holding to new promoter Ajay Singh, who has already pumped in Rs 500 cr in the so far of the over all Rs 1,500 cr investment commitment. The balance Rs 1,000 cr is expected to be infused in two more tranches of Rs 500 cr each by this month and next month.