Mumbai: Ratings agency Crisil has downgraded its ratings on the bank facilities of low fare carrier SpiceJet citing mounting pressures on cost structure and a limited ability to pass it on consumers due to cuthroat price wars.
It has downgraded the facilities to 'CRISIL BB-/Negative/CRISIL A4' from 'CRISIL BBB/Stable/CRISIL A3+'.
Instruments with the BB- rating are two notches down from a BBB rating which signifies a moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk. Instruments with a BB rating, a notch above BB-, are considered to have moderate risk of default regarding timely servicing of financial obligations.
Crisil downgraded the short term rating to A4 from A3+. Instruments with A4 rating are considered to have minimal degree of safety regarding timely payment of financial obligations. Such instruments carry very high credit risk and are susceptible to default. A3+ signifies slightly more than a moderate degree of safety regarding payment obligations
“The downgrade reflects CRISIL's belief that SpiceJet's operating performance will remain under pressure in the near to medium term, driven by significant increase in the operating cost and limited ability to pass on the increased cost to customers due to intense competition. Further, SpiceJet was expecting some cash infusion from the sale and lease back transactions that got delayed due to late delivery of the new aircraft. Hence, liquidity profile has weakened,” Crisil said in a statement.
Due to stretched liquidity, SpiceJet has sought a three-month relief window from one of its lessors towards payment of leases, it said, without specifying.
SpiceJet confirmed the same.
“..with regards to ONE single lessor mentioned in the Crisil report we had taken a one-time relief of 2-3 months to better manage cash flows during the lean month of September 2018,” said an airline spokesman.
Last week, credit-rating agency ICRA downgraded the long term rating of Interglobe Aviations (IndiGo) Rs 8,000 crore bank facilities, taking into account the difficult macro-economic conditions facing Indias airline industry. Earlier this month, it downgraded Jet Airways long term borrowing programme.