SpiceJet shares fly as airline likely to get additional Rs 1,000 crore under emergency credit

Domestic airline SpiceJet is expecting to receive an additional Rs 1,000 crore as part of the modified Emergency Credit Line Guarantee Scheme (ECLGS), sources told CNBC-TV18 on Thursday.

Following the development, SpiceJet shares rallied over 9 percent in early deals. At 9:33 am, the aviation stock was trading 6 percent higher from the previous close at Rs 40.75 on BSE.

The additional funds will help SpiceJet clear statutory dues, and lessor payments, induct new MAX planes and operate a younger fleet that will increase operational efficiency and support cash-profitable operations.

The additional support through ECLGS would significantly reduce the cost burden and older dues of the budget carrier.

SpiceJet’s Chairman and Managing Director Ajay Singh thanked Finance Minister Nirmala Sitharaman and Civil Aviation Minister Jyotiraditya M. Scindia for the latest decision to enhance the ECLGS limit for the “troubled” airline sector. “This will provide a tremendous boost for airlines,” he said.

“The speed and urgency with which the aviation and finance ministries have been taking up issues and problems being faced by airlines post COVID-19 and due to the record high oil prices is nothing but remarkable,” he said.

Singh also requested the government once again for its support for including aviation turbine fuel under goods and services tax (GST), which would be a game changer for the entire sector.

The statement comes days after the Finance Ministry modified the Emergency Credit Line Guarantee Scheme (ECLGS) by raising the loan limit under the scheme to Rs 1,500 crore from Rs 400 crore to help the COVID-hit industry tide over liquidity stress.

Recognising that an efficient and strong civil aviation sector is vital for the economic development of the country, the Department of Financial Services (DFS) has modified the ECLGS on Tuesday to enhance the maximum loan amount eligibility for airlines, an official statement issued on Wednesday said.

As per the modified ECLGS 3.0, an airline would be eligible for "100 percent of their fund based or non-fund-based loan outstanding as on the reference dates or Rs 1,500 crore, whichever is lower; and of the above, Rs 500 crore shall be considered, based on equity contribution by the owners."

All other criteria terms and conditions parameters prescribed under the operational guidelines of the ECLGS on August 30, 2022, would be applicable as it is, it said. The modifications introduced are aimed to give necessary collateral-free liquidity at reasonable interest rates to tide over their present cash flow problems.