Indian low-cost carrier SpiceJet will divide its operations in two, hiving off its cargo arm, SpiceXpress, to become an independent airline. Unlike SpiceJet, which is currently making a loss, SpiceXpress is a profitable business. The split will therefore allow SpiceXpress to secure its own capital whilst still under the ownership of SpiceJet.
SpiceXpress Splits Off
SpiceJet has finally received the necessary approval from banks and investors to separate its cargo wing from its primary operations. The plan was first announced on 17 August last year, when the airline approached the government for a No-Objection Certificate for the new carrier. Since then, the airline has been in talks with shareholders to finalise the deal, and if all goes to plan, the split should be complete by the first week of August.
Launched in September 2018, SpiceXpress started by moving freight between Delhi and Bengaluru with a Boeing 737-700. In 2019, its services expanded beyond India’s borders, operating flights to Hong Kong and Southeast Asia. Today, the subsidiary has a fleet of five aircraft: two Boeing 737-800Fs and three 737-700fs, all converted freighters over 20 years old.
Implications for SpiceJet
The separation will help SpiceXpress grow quickly by allowing it to raise funds independently. SpiceJet’s Managing Director, Ajay Singh, told the Press Trust of India, “SpiceXpress will also be able to raise capital independent of SpiceJet to fund this growth. We are confident that the performance of SpiceXpress as an independent entity will leverage and unlock significant value for SpiceJet and all its shareholders.”
In the past, investors may have been put off investing in SpiceJet, as its profitable logistics business was still tied to the loss-making passenger operations. SpiceJet’s passenger service is under scrutiny at the moment, following a number of technical failures during flights. The airline has suffered no fewer than eight malfunctions since 19 June, leading the Directorate General of Civil Aviation (DGCA) to begin disciplinary measures.
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