A trusted source of Asia-Pacific commercial aviation news and analysis

JUNE 2021

Cover Story

Smaller but smarter SpiceJet

A drastic fleet reduction, renegotiations of vendor payments, a laser focus on cargo, some government support and a lifeline from Boeing are the pillars of SpiceJet’s journey to beyond the pandemic. Anjuli Bhargava reports.

next article »

« previous article


June 1st 2021

Print Friendly

In March last year, soon after the collapse of airline operations worldwide and in domestic India, SpiceJet’s obituary was written - and before most of its rivals. Read More » Unlike IndiGo, recently re-christened GoAir to GoFirst, Vistara and even AirAsia India, SpiceJet did not have founders or backers with deep pockets.

Although the Mumbai LCC is the only listed carrier in India besides IndiGo, it was considered the “weakest” and the least likely to survive the COVID-19 pandemic.

But the airline has surprised its naysayers not only by staying in business during the pandemic’s carnage, but by its success in identifying niche revenue opportunities and exploiting them to the hilt.

Within weeks of COVID-19’s global outbreak, SpiceJet was operating as many charter flights as it could. SpiceJet chairman and managing director, Ajay Singh, who has a 60% equity in the carrier, focused on cargo and charter operations the moment it became clear passenger traffic was taking the beating of its life.

But Singh’s fancy footwork, including the establishment of medical testing subsidiary, SpiceHealth, does not mean the airline has avoided big losses and the aggressive attention of unpaid lessors and suppliers.

Almost as soon as the COVID-19 crisis erupted, payments to all vendors were withheld. The airline cut salaries to a bare minimum across all grades, barring the lowest, and its debt is mounting. Its cash position has been dismal.

In recent months, a second wave of the pandemic has gripped India precipitating a 65% collapse in domestic traffic. Passenger demand that had been inching up since May last year disappeared overnight.

But this time around, local airline observers, experts and analysts were more circumspect about predicting doom for the country’s airlines, generally believing all six major carriers would somehow weather this storm - as they have others.

SpiceJet is India’s second largest airline and U.S. Ivy League educated Singh has made his strategy for survival clear - “scale down” and emerge stronger.

Air freight has been a major focus for SpiceJet in 2020 and this year. Pre-pandemic, cargo operations were barely bringing in Rs 25 crore plus (US$5 million plus). In recent months, they have shot up to Rs 200 crore. The LCC has converted some of its Q400s to cargo, a decision labeled as “one big saviour” for the airline, along with charter flights.

If SpiceJet was aggressive in chasing revenue opportunities wherever it spotted them, it was equally aggressive in cutting costs. Any contract that could be renegotiated was, including sharp cuts in lease rates. “Threats to take back aircraft are falling on deaf ears and this is happening globally,” said the head of a leasing company based in London. “Terrible as COVID-19 may be, it has resulted in a changed environment, bringing in savings in unexpected ways in areas of cost such as aircraft leases.”

SpiceJet has secured Rs 600 crore in annual savings (Rs 50 crore per month) from a downward revision of its lease rentals. The airline’s wage bill has fallen and is likely to be reduced again as the carrier prunes staff.

 Sources calculate SpiceJet’s total debt is close to Rs 1400 crore, a bit below US$200 million, of which around Rs 1000 crore is for aircraft leases. They continue to be renegotiated and are expected to be lowered.

Pre-pandemic, the airline had a fleet of 116 aircraft including 32 Q400s. Thirteen 737 MAXs are grounded. The LCC is down to 35 Boeings and this is likely to be 25 soon.

It is counting on money owed to it by Boeing for the two-year grounding of the MAXs. Negotiations for settlement are continuing with SpiceJet trying to extract a larger cash component payment than Boeing is offering. But with the U.S. manufacturer suffering a series of misfortunes, it is likely the settlement will be more in kind than cash.

Post India’s second pandemic wave, the government’s attitude towards the aviation crisis has softened.

An emergency loan scheme allows each airline to access up to Rs 200 crore. A once-only loan restructuring scheme backs renegotiations of loans to Rs 500 crore, providing some cushion for all carriers.

In addition, Singh has another trick up his sleeve. It is widely believed he has the ear of the ruling government and its tacit support.

Although there is a grudging respect for the way Singh has steered his airline in this crisis, there also is a view he has missed a big opportunity to strengthen the company. Soon after the closure of Jet Airways, SpiceJet, like most of its peers, reported several quarters of profit, including its highest profit, Rs 261 crore, in April to June 2019.

Even before that result, the airline had several quarters of profits, including 14 in a row from January 2015 to June 2018. This should have been the time Singh brought fresh funds into the business, diluted his equity and attracted much needed capital to build the LCC’s cash reserves, this critique goes.

“At the time, the share price had risen to its highest peak and he [Singh] was best placed to strengthen the airline’s coffers,” infrastructure expert and former EY India partner, Jayesh Desai, said. ”SpiceJet missed a golden opportunity to build a more stable company with cushions for unforeseen COVID-like scenarios. Now, it finds itself flying into unknown territory.” The airline has recorded four quarters of losses and is moving to a fifth.

Debate aside about Singh’s opportunity lost pre-pandemic, he has taken the group into new territory with the launch of SpiceHealth, which conducts COVID-19 tests and is expanding its genomic sequencing.

But all of the above clearly is not enough to fill Singh’s day. Last March, he was announced as a shortlisted bidder for blighted Air India. If he is chosen as the new owner of the state-owned carrier, it is reported it will cost him another US$3.3 billion of debt. So what’s this about not seizing opportunities?

next article »

« previous article


Lydia Carol says:

October 25th 2021 04:38pm

HACK VANISH Credit specialist did it for me. Before the coronavirus pandemic, I had criminal Judgments, few evictions, and missed / late payment which negatively impacted my credit score down to 487 and left me in difficult financial situation, as a single mum of 3, I needed a loan to keep the family running after I lost my husband as a result of COVID-19, all hope were lost, until Mr. Kannan and Olivia reassured and referred me to HACK VANISH, a credit genius who was very helpful in fixing my report after I reached out to him via: +1(650) 499 5548 and Email: hackvanish (At) gmail (Dot) com, I carefully followed his protocols, throughout the process which lasted for about 6 days, I felt so involved because he maintained an open line of communication till I got my score back to 796, currently my loan application has been approved, I can now give my kids better life. If you need to hire a hacker, HACK VANISH is highly recommended.

Betty Kari - CREDIT REPAIR says:

October 25th 2021 04:37pm

I am very pleased with the help CYBER CREDIT GURU rendered in restoring my credits. I am a disabled Veteran who over the past 2 years had to let my credit go due to health priorities that were not covered by VA & other insurance, my credit scores were 514 Experian, 515 Equifax, and 518 TransUnion. No public records, only 3 open Accts but several collection Accts with Zero Balances, few Weeks ago, I ran into some Credit blogs on the net which led me to CYBER CREDIT GURU the most talked about US based Russian hacker, who tremendously repaired and upgraded my credit score to 784, 789, and 802 within the 3 Bureaus in just a Week after I contacted him. If faced with similar challenge, connect with him via: C Y B E R C R E D I T G U R U (AT) G M A I L (DOT) C O M or Call / Text: +1(650) 239 7249 you too can be helped, I recommend him without hesitation.


Your email address will not be published. All fields are required.

* double click image to change