SpiceJet’s plans to split off its logistics and cargo business into a separate entity called SpiceXpress as it is encountering legal challenges, with lenders and aircraft lessors criticizing the move.

Goshawk, one of SpiceJet’s lessors has moved to the Delhi High Court (HC), seeking to regulate the airline’s plan to hand over any of its assets to a separate company unless the airline transacts its pending payments of over USD 16.2 million as rental leases on three aircraft.

The Delhi HC has restricted SpiceJet from separating the assets in its interim order. This development is a major obstacle for the airline as separating and monetizing the cargo unit is one of the main strategies to recapitalize the company. SpiceJet is in discussions with several private equity investors to sell shares in the logistics division for raising funds.

People who know about SpiceJet’s business plans stated that investors in their discussions have clearly mentioned that they want the cargo business to be completely disconnected and kept away from the passenger business.

The airline has also appealed for a new air operator permit for the cargo arm to the Ministry of Civil Aviation and has founded management, separate from the passenger business. However, it mentioned that the request for a stay has been denied by the court on the transfer of the logistics business to its subsidiary.

The company recently stated that it had obtained approval from shareholders for shifting its cargo and logistics services business to SpiceXpress and Logistics on a slump-sale basis at Rs 2,555.77 crore (approximately USD 345 million).

Lenders of SpiceJet had also expressed concerns about the shift. With no growth in the passenger business, the cargo arm is bringing in revenue for SpiceJet. Splitting off the logistics company would eliminate one of the major cash segments of the company.

However, the airline has agreed to first clear the dues using the cash obtained from the monetization of the cargo arm. The airline might get a no-objection certificate from banks with this undertaking.

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https://www.business-standard.com/article/companies/spicejet-s-plan-to-hive-off-cargo-business-faces-challenge-from-creditors-121092700200_1.html