Bombardier, culture, Maran, Pilots, Q400. Ajay, Singh, Spicejet
Yesterday, SpiceJet announced 5,00,000 seats for sale, bringing back the airline’s ‘Sale’ after a gap of three months. This does send across a message that the airline has set its focus on staying afloat. We discuss SpiceJet under its re-crowned king: Ajay Singh.
Ajay Singh is believed to return to SpiceJet because of two reasons: Him being approached by Maran to revive SpiceJet, who was mulling over closing the airline; and the lower oil prices, and an economy that’s poised to grow. Being a BJP man, he was also approached by the government to salvage the airline, as an airline that bites the dust will imperil the investment climate in the country, posing strategic imperatives for many including the government. And the people, for whom airfares will increase.
The 2015 summer schedule, which comes into effective March 28th onwards, has been planned for 280 daily flights, to be operated with a fleet of 26 Boeing 737s and 15 Q400s – a 41 aircraft fleet, of which 39 will be active at any given time, up from today’s 16 Boeing 737s and 14 Q400s. The commercial team swung back into action, opening bookings till October 2015, and offering 5,00,000 seats for sale, boosting cash flows at the airline. Ajay’s idea is to bounce to a 35 aircraft Boeing fleet as soon as possible- which would be a challenge given that the airline today doesn’t have enough Boeing pilots to fly a fleet of that size. Reportedly, the airline by end of March will have enough pilots to fly only 15 Boeing 737s, as a significant number are serving their notice period. Ajay has appealed to these pilots to reconsider their decision to leave.
Ajay’s priority, as far as the Q400s are concerned, is to pressurize and renegotiate with the manufacturer – Bombardier, to make the turboprop fleet a profitable one, allowing the Q400s to stay for a longer period, and perhaps growing the fleet. Ajay was never in support of the Q400, but as in previous analysis on this site, the turboprops are good money makers, and are needed by SpiceJet to differentiate itself from a big player like IndiGo, by offering routes that are both commercially and technically unfeasible for narrow bodies to operate on. The only problems that SpiceJet may be facing are maintenance and support issues. Ajay looks to making the Q400 fleet ‘a profitable fleet’. SpiceJet has received immense support from Boeing, but has been disappointed with Bombardier who has apparently not behaved as fairly with the airline as they should have.
With money flowing in, Ajay aims to renegotiate all those bad contracts that have been signed.
Ajay wishes to treat the pilots who’ve recently left as furloughed, and looks to getting them back on board on priority. However, this would be a challenge from a technical, emotional and legal perspective, especially for those who have already started flying on another type.
Ajay Singh is looking to introduce a cultural change, or rather, bringing back a culture of transparency between the employees and the higher management. Ajay will look towards better employee and customer engagement, with his aim of achieving perfection in human interaction.
For example, although the present COO Sanjiv had made it clear to all employees that he was accessible anytime via email, there were others lower in the chain of command who had broken this link of direct communications. The Flying Engineer, who had interacted with certain operational staff, had vented out their frustration in not being able to reach the COO directly. Ajay Singh has been made aware of unwanted forces in the airline, and has initiated a task to indentify the negative, and the passionate, and separate these forces for the benefit of the airline, to bring back a cleaner culture they started with, in 2005.
Uplifting hot meals for the crew was recently resumed.
To bring in a greater sense of belonging and loyalty, Ajay Singh is looking to introduce an employee stock ownership plan (ESOP). He reportedly told a section of employees, “I want to see all of you owning a piece of SpiceJet”.
To help reset the airline to a comfortable position, Ajay Singh will put money into the airline, in three installments – February, March, and April. He’s already pumped in some money into the airline, but that may have been an emergency infusion to help with aircraft that lessors look to repossessing.
Ajay seems to know what he’s getting into. Sources quote him as saying, “Plenty of sh*t I get on my plate with this acquisition. It needs cleaning up, and it will take time to clean up. I’m still discovering the problems at SpiceJet.“
Who sh*t on the plate?
Perhaps there is nothing quite as frustrating as working for someone who doesn’t grasp the basics of the business. Kaneswaran Avili, CCO at SpiceJet had tweeted on 14th November 2014, the day of a board meeting, “Aaaaiiyoo why no one understand RASK……”, very obviously referring to the board.
SpiceJet today is riddled with multiple problems, most of which are related to the airline being cash strapped for a fair period of time. Ajay being a director with SpiceJet since he sold his stake to the Marans in 2010, has kept a watch on the airline, and reportedly believes that the cash strapped situation arose because of some strategic decisions that went wrong in the early years of transfer to the Marans, and also because of certain commercial decisions which were taken primarily in the year 2013, which led to a significant cash burn for the airline, which the airline couldn’t recover from.
Having said that, Ajay reportedly doesn’t seem to throw the entire blame on Maran, as the latter’s background didn’t prepare him to take on airline – a business which is extremely competitive, and consumer centric, contrasting the other businesses he runs. Maran’s lack of involvement in the airline cost him.
Ajay feels he can make a difference, as his involvement in the airline he founded gives him a better understanding of the space. Ajay seems to be passionate about SpiceJet as a brand, and works hard to defend, just like Sanjiv Kapoor, that the present situation at SpiceJet is far different from that at Kingfisher in 2012.
While Ajay believes that the airline has a lot of positives to re-build on, including a strong team led by performers: Sanjiv and Kanesh, the external environment is fast changing – competition is stiffening. SpiceJet will have to play to its strength, to hopefully find itself in a healthier and comfortable state by May 2015 – a month when domestic travel demand is very high, and also the month the airline started operations in its present form, 10 years ago.