BUSINESS

EDC and Bombardier watching closely as Indian carrier SpiceJet grounds flights

12/17/2014 01:51 EST | Updated 02/16/2015 05:59 EST
MONTREAL - Export Development Canada and Bombardier both say they won't take a big financial hit as a result of financial troubles facing SpiceJet, India's low-cost airline.

The EDC, a federal credit agency which helped finance the lease of 15 Bombardier Q400 turboprops by the airline, said its investment is protected since the planes would be remarketed elsewhere if SpiceJet ultimately folds.

"It's part of doing business in that sector so right now looking like a pretty minimal impact," said spokesman Phil Taylor.

Bombardier said SpiceJet's financial problems have little direct impact on the Montreal-based aircraft manufacturer because the Q400s ordered in 2010 have been delivered and were financed by third parties.

However, the manufacturer also provides a wide range of maintenance for the Q400 fleet under a 10-year agreement signed by the airline and that Bombardier (TSX:BBD.B) is helping it to lower operating and maintenance costs and to optimize its routes.

SpiceJet grounded flights for much of Wednesday, forcing passengers to shift to other airlines, after oil companies stopped supplies of jet fuel, although some flights reportedly took off later in the day.

India's civil aviation ministry on Tuesday asked state-owned oil companies and airport operators to extend credit to SpiceJet for 15 days to prevent it from shutting down. But oil marketing companies had refused to supply jet fuel unless SpiceJet it paid in cash, according to reports in the local media.

The aviation ministry also said it would ask Indian banks to extend loans of around six billion rupees (US$95 million) to the airline to help keep it afloat.

SpiceJet has liabilities of about US$317 million, including money it owes to the oil companies and airport authorities in India. Like many Indian airlines, SpiceJet has been hit by high fuel costs and a weak rupee.

Meanwhile, the EDC said it would be fairly easy to relocate the Bombardier planes, which have a list price of US$30 million apiece, if SpiceJet ultimately ceases operations.

"They are reasonably new so that should be relatively easy to remarket," Taylor said. "Q400s still have pretty healthy demand out there."

Bombardier spokeswoman Marianella de la Barrera said Bombardier is committed to helping SpiceJet turn things around but believes the planes are sought after in secondary markets and could find new operators if necessary.

"We do have experience in this regard," she said of the help that Bombardier is extending to SpiceJet. "We have supported our airlines . . . that have gone through hardships and emerged healthier for it."

— With files from The Associated Press

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