If you want to be a millionaire, start with a billion dollars and launch a new airline." This statement from billionaire Richard Branson exemplifies the state of SpiceJet Chairman Kalanithi Maran. In 2010, when Maran acquired SpiceJet for some Rs 750 crore, the airline had cash reserves of more than Rs 450 crore. Over the years, Maran pumped in more money into the airline. Today, nobody is talking about the value of his stake. Instead, the focus has shifted to money the airline owes - around Rs 1,300 crore - to its lenders, the Airports Authority of India, vendors and tax authorities.

In the third week of December, when Maran's flagship Sun Group expressed its inability to inject more funds to revive SpiceJet, one of the airline's founders, Ajay Singh, jumped in with a deal where he, along with two global private equity investors, would invest between Rs 1,200 crore and Rs 1,500 crore to get the carrier back on its feet. Singh, who got out of the airline in 2010, has made some stop-gap arrangements - about Rs 100 crore - to pay off employees and oil marketing companies, which had refused to refuel the planes.

But why is Singh interested in reviving SpiceJet? Why setting up a new airline is not a better proposition, considering it would cost an estimated $30-40 million (Rs 180-240 crore) to start from scratch?

One of the main reasons Singh is interested in SpiceJet is that the airline has a significant market share. "SpiceJet has an established infrastructure. If some investors infuse money, and the government also pitches in with limited facilitation, I see a future for SpiceJet," says Kanu Gohain, former head of the Directorate General of Civil Aviation, the sector regulator.

The airline cemented its position on the basis of its three prized possessions: time slots in key cities, parking bays and a wide network. Take time slots, for instance. The policy for slots allocation acts as an entry barrier for new players. Each airport allots slots depending upon a host of factors: terminal capacity, runway, baggage belts, among others. In India, slots are allocated twice a year and existing airlines get huge preference over new entrants at the time of allocations. Most prime slots have already been taken up by the existing players.

In fact, after Kingfisher Airlines went belly up, many of its slots were given to incumbents such as IndiGo, SpiceJet and GoAir. "Parking bays along with slots is a major constraint. They are not easy to acquire. An incumbent like SpiceJet definitely has an advantage," says Amber Dubey, Partner and India Head of Aerospace and Defence at consultancy KPMG. "A new airline would take four years to reach the size and scale of SpiceJet."

Experts say there are many regulatory hurdles to start and grow an airline in India. A case in point is the recent entrant AirAsia India. The low-cost carrier announced its India entry in February 2013. After nearly two years, it is operating just two Airbus A320 planes. There were reports that AirAsia was looking to get seven slots at the Delhi Airport but it has been offered only three slots for now.

SpiceJet also has the largest network among low-cost carriers. It flies to 39 locations as compared to IndiGo's 32 and GoAir's 22 destinations. But SpiceJet followed a wrong approach. In 2011, the then CEO Neil Mills introduced turboprops (Bombardier Q400 NextGen) to tap into the regional demand.

The airline was operating Boeing 737s at the time. It turned out to be a mistake because the airline required two sets of people - pilots, engineers, cabin crews - at several locations. This jacked up the overall costs. "In hindsight, it looks like a bad decision," says Ankur Bhatia, Executive Director, Bird Group, which provides ground handling services to SpiceJet. "Globally, successful low-cost carriers such as Ryanair, JetBlue and Southwest Airlines follow one-aircraft model."

The crisis at SpiceJet comes at a time when the Indian aviation industry has yet to recover from the debacle at Kingfisher, which was grounded barely two years ago. There are fears that another failure will send out a wrong message to global investors about India's aviation sector where seven airlines have shut shop due to financial problems in less than two decades.

To revive SpiceJet, the new investors would have to go back to the one-aircraft policy, rationalise its network and workforce to keep costs down, and take complete control of the airline. At the end of September, Maran owned 53 per cent of SpiceJet. "Maran has two options. Either he will exit fully or will remain a [silent] minority investor," says a person involved in the negotiations.

People close to the development say exact details of the investment have not been finalised yet since due diligence is still underway. On December 26, the SpiceJet management and Singh reportedly submitted a revival plan with the government. Industry observers feel the PE investors will bring a major chunk of the money while Singh will take managerial control. "Singh has both technical and managerial skills, and since he was at the helm [of SpiceJet] before, he might come as investor-manager," says Dubey.

The new investors are betting on the growth potential of the aviation market in India and long-pending reforms. India is one of the fastest-expanding aviation markets globally. Total passenger traffic is likely to surge from 101 million in 2014 to 367 million in 2034, the trade group International Air Transport Association (IATA) estimates.

Falling jet fuel prices will also help as fuel makes up over 40 per cent of an airline's operating cost. There is potential to get hefty returns in case of a turnaround. SpiceJet shares have dropped about 60 per cent in the past two years. Since PE investors typically invest with a five- to seven-year horizon, they have enough room to earn returns on their investment in SpiceJet.

"Airlines create substantial value for consumers and businesses but have been unable to generate sufficient profit. This has led to airlines being forced to cease operations in the past. Similar worries are being played out in India. The government must steer the aviation policy in a coordinated manner which addresses the underlying problems," Amitabh Khosla, Country Director (India), IATA.

The success of a low-cost carrier hinges on one basic rule: moving the maximum number of fliers at the minimum cost. For Singh & Co, it will be about maximising the airlines strengths and undoing the mistakes.