SpiceJet has lost its court battle with De Havilland Canada and will have to pay $43mn in damages. The dispute arose after the India low-cost carrier refused to make pre-delivery payments for 15 Q400s, breaching the order contract. SpiceJet has said that it will appeal the ruling.
According to Business Standard, a UK High Court ruled in the favor of De Havilland Canada in a dispute over SpiceJet’s failure to pay pre-delivery payments (PDPs) and accept delivery.
The dispute stems from SpiceJet’s order for 25 Q400s (with options for 25 more) in September 2017. The carrier only took delivery of five planes from the order and failed to make payments for the remaining aircraft, causing De Havilland to sue SpiceJet.
In March 2020, de Havilland sued SpiceJet for $42.95mn in damages after it failed to make PDPs for 15 aircraft and refused delivery of three planes. The dispute arose after SpiceJet claimed that it no longer had to pay PDPs due to De Havilland Canada suspending the timeline for aircraft delivery.
This week De Havilland won in court, allowing it to terminate the contract fully and win $43mn in damages from SpiceJet. This means SpiceJet won’t receive any more Q400s for the foreseeable future and will have to pay at this difficult time for the airline.
Not over yet
While SpiceJet may have lost in the UK High Court, it has already announced plans to appeal the decision. Even if it does lose its appeal, under Indian law, De Havilland Canada will have to file another application to execute the judgment. This means it will be a while before the manufacturer will have the chance to receive damages, assuming it wins the appeal.
The Q400 plays an important role in SpiceJet’s fleet, serving on new regional routes and as a freighter during COVID-19. While not taking more deliveries will help the airline temporarily, it might find itself struggling with undercapacity in the future. For now, SpiceJet will be hoping to avoid paying millions in damages during such a financially tough time.
Not the first
This isn’t the first time in recent history that SpiceJet has had a falling out with its aircraft providers. In October, the carrier was sued by two lessors for $27mn in unpaid leases for six Boeing 737s. This case is also under consideration in the United Kingdom and could mean SpiceJet loses more planes.
Despite its woes, SpiceJet managed to survive this crisis through its focus on cargo. The carrier has seen cargo demand jump by over 100% in the last year as supply fell. However, the mounting lawsuits pose a significant challenge to the carrier.