SpiceJet: When Luck Is A Double-Edged Sword

I am a great believer in luck and I find the harder I work, the more I have of it.

- Thomas Jefferson, 1743-1846

Luck can often land up being a zero-sum game. Sometimes it’s on your side but when it turns, it can run out almost as swiftly. In the case of SpiceJet’s chairman and managing director Ajay Singh, luck currently appears to have run out and how.

In 2014-15, soon after Singh took charge of a beleaguered airline from the Marans — it was clearly not their cup of tea — luck played some part in where he found himself. The airline was on the brink of closure, dues had mounted and the Marans were not in a position to pull the airline back from the precipice it found itself. Singh took charge of the carrier for the now famous ₹2 and the Marans also invested ₹578 crore to keep the carrier afloat.

Luck was on Singh’s side as soon as he took charge, aviation turbine fuel (ATF) prices, an important factor in determining airline economics, which had been quite high when Marans were in charge, came down. Along with a series of other quick decisions and renegotiations, Singh successfully turned the airline around. The airline expanded its fleet, the number and frequency of routes, its loads were robust and it went through a spell of many profit-making quarters. Things were so good that in 2017 Singh gave Boeing an order for 200 Max aircraft, 155 firm and the rest on options.

The 2019 Max crash and its subsequent grounding marked the end of this spell of good fortune. As Boeing stopped deliveries, SpiceJet’s plans to replace its less efficient aircraft with brand new, more fuel efficient planes came to a grinding stop. In March 2020, it no longer mattered whether one had any aircraft at all since all scheduled operations globally halted following the pandemic that was to hold all airlines in its uncertain grip till very recently.

By December however the Max aircraft was cleared for operations again, first in the U.S., followed by others. But the repercussions of the crash and a series of other crises racked Boeing. The aircraft manufacturer started redelivery of its planes but all customers of the airline have suffered and continue to suffer the repercussions of their manufacturers’ wide ranging troubles. Had the aircraft been delivered as promised, most of the airlines who have large orders — including SpiceJet — would be sitting on a substantial sum thanks to sale and lease back.

To say that 2020 and 2021 have been the worst years for the aviation industry globally is an understatement. Many were quick to write the obituary of SpiceJet within weeks of the pandemic’s start but the airline — led by Singh — proved quite resilient. Delaying payments, renegotiating contracts, cutting salaries and a series of similar steps, including pulling in some revenue from cargo flights, helped the carrier stay afloat. A lot of the liabilities that totted up were ironically for aircraft that never flew for two years!

Even as the pandemic showed signs of abating and giving the sector a breather, on February 24, Vladimir Putin attacked Ukraine and sent global oil prices into an inexorable rise. On June 14, chairman and managing director of SpiceJet Ajay Singh publicly exhorted the government to intervene and ease some of the pain that airlines were facing on account of soaring ATF prices. His plea was seen by many as the noose tightening around the necks of a sector and an airline that has been gasping for breath since early 2020.

But now as industry experts and observers take stock of who stands where, many continue to argue that SpiceJet is in a particularly vulnerable state and that the next few months could be make or break for the old lady of the low fare airline family in India. Although Singh would certainly fail any popularity contest, there’s a grudging respect both within the airline and outside of it for his abilities to survive when he finds his back firmly against the wall. Conspiracy theories on how he is staying afloat abound in the absence of deep pockets and a strong balance sheet like rivals but suffice to say that few now expect the airline to wind up. Old timers of SpiceJet — some have been with it since 2004-05 — say that the brand and product has proved resilient through many ownership changes. In their minds, whether Singh steers them to safety or someone else, is largely irrelevant. Mass exodus of SpiceJet pilots and staffers — predicted by many through 2020 and 2021 — has failed to happen.

The airline’s losses — like its rivals — have totted up. Total dues currently stand closer to ₹3,500 crore. The airline has started replacing its old Boeings with new and more fuel efficient Max but as of now only 12 planes are in the air as against almost 100 aircraft if Max deliveries had happened as per the original schedule. By the end of 2022, the airline hopes to have at least another 7 Max flying, improving overall economics for the airline. Singh is meanwhile attempting to reach settlement with some lessors and also betting on monetising his cargo business, built up during the pandemic.

Passengers say signs of neglect, perhaps, due to a severe cash crunch are reflecting in the aircraft and their upkeep. Industry sources say the airline is desperately looking for investors but is unable to find any. A series of incidents including one serious one where passengers were injured have sullied its report card of late. Though another one involving a bird hit is pure bad luck. Nonetheless, luck remains the mystery card that nobody can read. Whether it will turn in favour or further against remains an enigma, the single factor that can alter the whole course on this long and rocky runway.