SpiceJet, India’s prominent low-cost airline, has successfully resolved a significant dispute with Canadian aircraft manufacturer Bombardier over a fleet of Q400 turboprop planes. The resolution comes in the form of a $90 million settlement, marking the end of a prolonged legal battle and financial tension between the two parties. This deal is particularly notable because it involves the acquisition of 13 Q400 aircraft, a key component of SpiceJet’s regional flight network.

According to the airline, the settlement will save SpiceJet $68.3 million in operational costs. On the final settlement and after the prolonged resolution, SpiceJet Managing Director Ajay Singh called the settlement a “major financial milestone”. He said the resolution would allow SpiceJet to move forward with a strengthened balance sheet and focus on the Q400 aircraft back into service as quickly as possible.

BACKGROUND OF THE DISPUTE

The roots of the dispute date back to a 2017 agreement between SpiceJet and Bombardier. Under the terms of this agreement, SpiceJet placed an order for up to 50 Q400 turboprop aircraft, with the intention of expanding its regional operations across India. The Q400 aircraft, known for their fuel efficiency and ability to operate in smaller, regional airports, were seen as a perfect fit for the airline’s expansion plans.

However, the deal quickly ran into complications. SpiceJet faced challenges related to delivery delays, technical issues with some of the aircraft, and concerns over the terms of the purchase agreement. These issues led to the airline and the manufacturer entering a prolonged dispute over the contract, with SpiceJet questioning the quality and the terms surrounding the fleet of Q400s. At one point, the airline sought to cancel or renegotiate the terms, citing the failures and non-compliance with certain delivery schedules.

THE LEGAL BATTLE

As the dispute escalated, it eventually ended up in the courts, with both parties seeking legal recourse to protect their interests. SpiceJet accused Bombardier of failing to deliver the aircraft as agreed upon, while Bombardier, on the other hand, sought to enforce the contract and hold SpiceJet to its financial obligations.

The case drew significant attention, not only because of the high stakes involved but also due to the broader implications it had for the aviation industry. SpiceJet, one of the largest low-cost carriers in India, relied heavily on its fleet of regional aircraft to service a rapidly growing domestic market, while Bombardier’s Q400 aircraft were a key part of its strategy to maintain a competitive edge in the regional turboprop market.

THE $90 MILLION SETTLEMENT

After several years of back-and-forth legal wrangling, the dispute was finally resolved with a $90 million settlement. Under the terms of the agreement, SpiceJet agreed to acquire 13 Q400 aircraft from Bombardier, while the manufacturer agreed to settle outstanding claims and provide certain concessions regarding aircraft delivery and performance.

The settlement represents a significant victory for both parties, albeit in different ways. SpiceJet successfully avoided the financial and operational burden of a prolonged legal battle, while securing the 13 aircraft that are critical for its expanding regional network. On the other hand, Bombardier, which has since sold its regional aircraft business to Longview Aviation Capital in 2019, was able to resolve the dispute and close the chapter on this contentious deal.

STRATEGIC IMPORTANCE FOR SPICEJET

For SpiceJet, the acquisition of the 13 Q400 planes is a critical component of its strategy to further strengthen its position in the Indian aviation market. India’s regional aviation market has been experiencing significant growth in recent years, driven by increasing air travel demand, government support for regional connectivity, and the rising popularity of smaller, more affordable aircraft for shorter routes.

The Q400 planes, known for their ability to operate on short regional routes with limited infrastructure, fit seamlessly into SpiceJet’s plans to service underserved and smaller airports across India. The airline has made a concerted effort to improve connectivity between tier-2 and tier-3 cities, and the Q400 aircraft will play an important role in meeting this growing demand.

IMPLICATIONS FOR THE INDIAN AVIATION SECTOR

This deal and its resolution also have broader implications for the Indian aviation sector. India’s aviation industry has experienced significant growth in the past 10 years. India is the third-largest domestic aviation market and the aviation sector in India has shown substantial growth, with a 15 per cent increase annually. In total, air passengers handled at Indian airports reached 37.6 crore in FY24. The number of operational airports in the country has doubled from 74 in 2014 to 157 in 2024 and the aim is to increase this number to 350-400 by 2047. Domestic air passengers have more than doubled in the past decade, with Indian airlines significantly expanding their fleets.

The government’s policies and initiatives in such line have prioritised the sector which was under the scanner for the massive potential and scope for connectivity. One such initiative is the Regional Connectivity Scheme – Ude Desh ka Aam Nagrik (RCS-UDAN) launched in 2016, which aims to provide connectivity to unserved and underserved airports of the country through the revival of the existing airstrips and airports.

“The resolution would allow SpiceJet to move forward with a strengthened balance sheet and focus on the Q400 aircraft back into service as quickly as possible”
—Ajay Singh, Managing Director, Spicejet

The Indian government has heavily invested in improving regional air connectivity through the UDAN scheme, which aims to make air travel affordable and accessible to a wider population. The settlement and the aircraft acquisition align with these goals by enabling SpiceJet to offer more services to underserved regions, stimulating regional economic growth, and providing more affordable travel options.

So far, under the scheme, 83 RCS routes have commenced operations connecting 86 airports including 13 heliports & 2 water aerodromes. According to the Ministry of Civil Aviation (MoCA), more than 1.43 crore passengers have availed of the benefits of the scheme and more than 2.8 lakh flights have operated under the UDAN scheme so far. Under the scheme, ₹4,500 crores have been allocated for the development of airports in the country under the Scheme, out of which ₹3,751 crores have been utilised since its inception.

Additionally, the settlement signals a broader trend in the aviation industry, the increasing importance of regional fleets to airlines that are looking to expand their domestic networks without incurring the massive costs of larger jets. For Bombardier, the successful resolution of the dispute ensures it can maintain its foothold in the regional aircraft market, especially as the global aviation landscape continues to evolve.

The resolution of SpiceJet’s dispute with Bombardier over the 13 Q400 aircraft is a significant moment for both the airline and the broader aviation industry. The $90 million settlement brings closure to a contentious legal battle and sets the stage for SpiceJet to enhance its regional network in India. This deal not only benefits SpiceJet’s growth ambitions but also underscores the importance of regional aircraft in the everexpanding aviation sector in India. As SpiceJet moves forward with its fleet expansion, it remains to be seen how the airline will continue to shape the future of air travel in India, particularly in terms of regional connectivity and service expansion.