SpiceJet is in the news these days, unfortunately, for all the wrong reasons. On 1st September, a SpiceJet plane that took off for Nashik from Delhi had to return midway due to an ”autopilot” snag. Earlier that day, shares of the airline tumbled to a one-month low at Rs 39.6 apiece on the BSE. This was partly due to the resignation of its chief financial officer (CFO) SanjeevTaneja and partly because of a reported net loss of Rs 789 crore for the June quarter. 

It is to be noted that SpiceJet’s Chief Financial Officer (CFO) SanjeevTaneja resigned on Wednesday amid reports of widening losses and a series of mid-air incidents. As far as profitability is concerned, the airline has been reporting losses due to higher fuel costs and unfavourable foreign currency. The company suffered a net loss of Rs 458 crore. For the March quarter, the overall loss incurred by SpiceJet in FY22 was Rs 1,725 crore, 73% more than the previous year. 

Multidimensional Problems

While there is no one denying that factors including the weakening rupee, surging aviation turbine fuel (ATF) prices, increasing operations costs, and Covid-19 have impacted the profitability of every airline, be it Indigo, Vistara or even Air Asia. However, the trouble for SpiceJet has many dimensions. 

Firstly, the flight operations of SpiceJet have been lambasted by the Director General of Civil Aviation (DGCA), a civil aviation regulator in India. Apparently, the budget airline has had eight incidents of technical nature in the past few weeks. The list includes a cracked pane in a windshield, door warnings, pressurisation issues, malfunctioning fuel indicators, and smoke in the cabin. After this, DGCA, on 27th July, ordered SpiceJet to operate only 50 per cent of its flights for the next eight weeks to ensure safe and reliable services. 

To counter, it could be argued that such incidents may also occur in other airlines’ operations. However, the thing to notice here is that DGCA, after the Mumbai-Durgapur flight incident, suspended the license of a SpiceJet pilot for six months for allegedly ignoring the co-pilot’s-pilot’s input during the flight. Well, this is something not accepted by a professional airline involved in the business for 17 years now.

It is noteworthy that DGCA in May levied aRs 10-lakh fine on SpiceJet for training 737 Max aircraft pilots on a faulty simulator. During a surveillance check by the regulator, the faults were detected at the Greater Noida-based facility of CAE Simulation Training Pvt Ltd (CSTPL). Earlier in April, The aviation regulator banned 90 SpiceJet pilots from flying the controversial Boeing 737 Max aircraft in India. It also issued show-cause notices to SpiceJet and training organisation CSTPL. 

As mentioned earlier, the problems with the airline have many dimensions. In May 2022, SpiceJet faced a ransomware attack on certain systems. Consequently, hundreds of SpiceJet airlines passengers were stranded at various airports and inside aircraft. As flight departures slowed down, flight operations took a hit for about four hours. Although the airline is said to have controlled the situation later, the pertinent question here to be raised is why the airline remains a soft target. 

Spicejet Then And Now

SpiceJet has an interesting past. The genesis of SpiceJet can be traced back to 1984 when Indian industrialist SK Modi established the company to provide private air taxi services. At that time, it was known as ModiLuft. In 2004, Ajay Singh acquired the company and planned to restart operations as SpiceJet. The idea was to provide flight services on a low-cost model. The first flight was operated between Delhi and Mumbai in 2005.

In its initial journey as a low-cost carrier, the airline started off well and put in place numerous expansion plans. In 2010, KalanithiMaran acquired a 37.7% stake in SpiceJet through Sun Group. The airline ordered 30 Boeing 737-8 aircraft worth USD 2.7 billion in the same year. However, in 2015, the Sun Group sold its shareholding and transferred control to Ajay Singh. 

In 2020, the airline, already facing operational challenges, had to confront the Pandemic-induced slowdown. It proved to be the biggest blow to operations of the budget airline. Drastic reduction in passenger business hurt most airlines, especially SpiceJet. The Bombay Stock Exchange, in fact, reported that ever since 2011, SpiceJet had been suffering losses. 

The Inexplicable Conundrum

To ease troubling financial woes, the option left with SpiceJet is to raise resources. Analysts argue that it is probably stuck in a Catch-22 paradoxical situation. To raise resources, there is a dire need for positive market sentiment. But positive market sentiment would be created if its operations and management are sorted, which is only possible if it has resources. The company has, however, said that it is planning to raise USD 200 million (around Rs 1,600 crore). Fair enough. Since the crisis-hit SpiceJet had delayed payment of salaries to staff for the second straight month, it is the need of the hour. 

Way Forward

Well, sooner or later, the company needs to understand that business can’t flourish without the satisfaction of your employees and, more importantly, your customers. From the early 2010s till now, there has been a drastic shift in customers’ overall preferences, and their opinion about the airline, in particular. The fact of the matter is that the quality of the services provided by the airline has not been at par with its stated commitment and broader objective. Careful observation suggests that customers have not been satisfied with the airline for the past few years. There is a reason Vistara has become the second largest airline surpassing SpiceJet. 

Be it SpiceJet or Vistara; the Indian aviation sector is bound to face such crises if the underlying issues remain unaddressed. Today, ”Affordable Air Travel” is the idea driving aviation space in India. Cut-throat competition between airlines would only end up in stressed balance sheets for the airlines. Also, an ambitious plan without enough capital may bring higher revenues but would result in shrinking profits. Lastly, faulty business restructuring during financial turmoil will only invite more misfortune. 

Currently, SpiceJet is engaged in all the fundamental mistakes that a company should avoid in the first place. A perfect dish is only made by adding spices in the right proportion. Disproportionate addition of necessary ingredients either causes food wastage or an upset stomach.