Ray of Hope for SpiceJet as Aircastle Drops Insolvency Case After $5.6 Million Settlement

SpiceJet announced that Ireland-based aircraft lessor Aircastle Designated Activity Company has dropped the insolvency case filed against the airline in the National Company Law Tribunal (NCLT) on Thursday. The announcement followed a $5.6 million settlement between the two companies. The move is a ray of hope for SpiceJet and has put the airline on the path of recovery amidst ongoing legal and financial struggles. 

“Aircraft lessor Aircastle (Ireland) Designated Activity Company has withdrawn its insolvency case against SpiceJet before the NCLT. This follows a mutually agreed-upon settlement, marking a positive turn in the airline’s efforts to rebuild and strengthen ties with its partners,” said SpiceJet in an exchange filing. 

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The company in the statement said the route to negotiation was chosen to avoid long courtroom proceedings. The settlement is significant as the company has multiple legal cases against it. “Both parties opted for an amicable negotiation process, successfully avoiding prolonged courtroom proceedings...This development marks another significant milestone for SpiceJet which has been actively resolving disputes with various partners, including aircraft lessors,” said the company in the statement. 

SpiceJet on Road to Recovery 

Trouble for SpiceJet began after the Covid-19 lockdown in 2020 as travel restrictions kicked in and the revenue for the airline decreased substantially. Troubles mounted in 2022 when its revenue nosedived, leading it to ground its aircraft as it suffered in making payments to the lessors. Moreover, prices of aviation fuel touched sky and took a toll on the company’s financial health. The alleged defaults in payments eventually led SpiceJet’s lessors and other vendors to initiate legal action against the company, including proceedings under the Insolvency and Bankruptcy Code. 

But things have started to change for the airline. In September this year, the company raised Rs 3,000 crore through a qualified institutional placement (QIP) and around Rs 736 crore from a previous funding round. The company said the proceeds will be utilised to operationalise grounded aircraft, acquire new planes, invest in technology, and expand into new markets. 

“The strong response from investors and institutions is a testament to their faith in SpiceJet’s potential to rapidly scale and become a formidable player in India’s burgeoning aviation market,” said chairman and managing director SpiceJet Ajay Singh. 

Apart from the financial health of the company becoming sound, now with Aircastle withdrawing the case, its legal battles have also come down.