In The News — Ajay Singh, CMD, Spicejet: Caught in an air pocket, once again

One would not have expected a politically incorrect statement from Ajay Singh. He is, after all, a seasoned campaigner having been associated with politics for decades now and that too at the highest levels — Singh was part of the Bharatiya Janata Party’s war room during the 2014 Lok Sabha polls and is believed to have coined the famous slogan Ab ki baar, Modi Sarkar. Thus, it was indeed a surprise when SpiceJet’s chairman and managing director described the recent safety-related incidents as ‘trivial’.

It was worrying too to listen to an airline’s chief tactlessly shrugging them off as events that happened in the normal course. Indeed, as has been pointed out, the Director General of Civil Aviation’s (DGCA) show-cause notice to the airline for “failure to establish safe, efficient and reliable” services isn’t as strong as it should have been. The issue here is a serious one, especially since the regulator was cognizant of the fact that SpiceJet was facing a shortage of spares, critical for the safety of the planes.

This was known even in September last year. Moreover, the regulator was aware the carrier was unable to pay suppliers and vendors in time and frequently invoked the minimum equipment list, under which the regulator allows airlines to operate with certain in-operative equipment. Given that there have been as many as eight malfunctions in 18 days, which required the aircraft to return to the originating station or to continue to land at the destination with “degraded safety margins”, the carrier hasn’t yet been grounded.

Moreover, it has a fairly long time of three weeks to get back to DGCA on the latter’s queries. One wonders whether other carriers would have got off as lightly. Although the incidents began in April, the regulator took its time to pull up the carrier.

To be sure, Covid-induced lockdowns have been a big blow to the aviation industry and it has been a very trying time for airlines. The soaring fuel costs have compounded their problems. But for a man credited with turning around the carrier, after he acquired it from the Marans in 2015, there were problems even before the pandemic.

In October, 2018, Crisil downgraded the company’s bank facilities to BB-/negative/A4 from BBB/stable/A3 saying its operating performance would be under pressure. While the business was bound to suffer in 2020-21 and 2021-22 given operations were low key, due to the lockdowns, SpiceJet’s performance in 2018-19 was nothing to write home about either as it reported a loss of Rs 316 crore. According to media reports, in April last year, Singh suggested to the aviation ministry, that capacity deployment be cut to 60%, from the prevailing 80%.

SpiceJet denied it had made such a request but industry insiders said it wanted to operate fewer aircraft to save costs, but also wanted rivals to do the same so as not to lose out. SpiceJet’s auditors have expressed doubts about its ability to continue as a going concern; the losses have resulted in the net worth being eroded. The debt is piling up.

The company postponed its financial results for the March quarter citing a ransomware attack on its IT systems. But with the losses for the nine-month period ended December 2021 at Rs 1267. 5 crore, it can’t be good news.

In many ways, Singh is back where he took off in 2015, with a financially-troubled airline. While things are looking up for the aviation sector, the cash crunch at SpiceJet is severe and the competition is getting more intense with Air India now in the Tata hangar, and Jet Airways and Akasa ready to take off. The challenge isn’t insurmountable but Singh can’t afford to scare away passengers.

He may have immense clout, but that may not be enough to bring them back. Singh clearly has to once again try very hard to live up to his reputation of a ‘turnaround man’. .