SpiceJet has finally detached itself from its cargo business SpiceXpress, making it a separate entity. The airline had been trying to do this for quite some time and received all the approvals last year. The development has led to a one-time financial gain for SpiceJet, which has been busy lately raising funds for its growth.

Separated

India’s low-cost carrier SpiceJet has managed to separate its passenger and cargo business by making SpiceXpress a separate cargo airline on April 1st. Going ahead, SpiceXpress can raise funds on its own, independently.

Attempts to separate SpiceXpress from SpiceJet had been going on for months. Last year, SpiceJet received all the necessary approval from banks and shareholders to hive off its cargo business; it was initially expected to be completed by August 2022.

Finally, now that it is an independent entity, SpiceXpress will see aircraft, trademarks, contracts, and all the rest transferred from the parent carrier. SpiceJet chairman and MD Ajay Singh said that the decision is in sync with the company’s long-term business plan and will unlock significant valuation of the logistic business.

Financial gain for SpiceJet

The deal has brought a one-time financial gain for SpiceJet of around ₹25 billion ($310 million) and reduced its negative net worth substantially. The airline said that the consideration for the sale will be discharged by SpiceXpress through security issuance in the combination of equity shares and compulsorily convertible debentures to SpiceJet for $310 million, positively impacting its balance sheet.

Get the latest aviation news straight to your inbox: Sign up for our newsletters today.

Unlike SpiceJet, SpiceXpress is a profitable enterprise. Between April and December 2022, the airline made a net profit of ₹540 million ($6.5 million). Singh commented,

“SpiceXpress will provide greater and differentiated focus to cargo and logistics business and will allow the possibility of raising capital for the business to accelerate its growth. Both SpiceJet and SpiceXpress have great potential and will complement each other well.”

Raising funds for growth

The financial boost from hiving off SpiceXpress will contribute towards SpiceJet’s attempt to raise funds as it looks forward to rebuilding its business after the COVID slump. Recently, Singh commented that he is open to selling more shares in the airline to deleverage the balance sheet and allow more space for the carrier to grow.

Check out more Indian aviation news here.

The airline, which posted a net profit of $13 million for Q3, also recently converted $100 million of outstanding dues into a 7.5% equity for its largest lessor Carlyle Aviation. The latest development also has Singh excited, and he views it as a “stepping stone in our growth story which shall unfold in the times to come.”

What are your views on this? Please leave a comment below.