This refers to the report "SpiceJet all but grounded, lenders refuse to play ball" (December 18). The trouble that SpiceJet finds itself in should not come as a surprise. While part of this can be traced to industry issues like high aviation turbine fuel price, lack of pricing power and debt overhang, a bigger part must go to the management's decisions. Airline after airline failed to turn high market share into profit and cash flow, leaving them with fixed cost of salary, depreciation and interest/lease rental, and a huge liability from forward sale of discounted seats. SpiceJet will not be able to make a turnaround if it follows the same strategy.
Equally dangerous is the news that the central government might be pushing banks to give further loans. The promoter group is apparently willing to give a guarantee, but it says it is not in a position to give cash, thereby diluting the credibility of their own guarantee. Banks should be left alone to take a call on increasing or decreasing their exposure to any particular company. Unfortunately, no public sector bank is in a position to say "no" when even a verbal communication comes from the finance ministry.
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Equally dangerous is the news that the central government might be pushing banks to give further loans. The promoter group is apparently willing to give a guarantee, but it says it is not in a position to give cash, thereby diluting the credibility of their own guarantee. Banks should be left alone to take a call on increasing or decreasing their exposure to any particular company. Unfortunately, no public sector bank is in a position to say "no" when even a verbal communication comes from the finance ministry.
P Datta Kolkata
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number