Even as it awaits investors, troubled low-cost carrier SpiceJet is busy trimming costs. On Friday, the airline’s management asked around 50 captains of its Boeing 737 fleet to leave by the end of the month, despite the six-month notice period stipulated by aviation regulator Directorate General of Civil Aviation (DGCA). Most of these pilots had resigned around October-November this year and were expected to join rivals like IndiGo and Jet Airways around March.
The move will help SpiceJet cut the wage bill, resulting in savings of about Rs 7 crore over three months. This is significant given the carrier is finding it tough to meet daily working capital costs of Rs 8-9 crore. The airline is currently on a cash-and-carry mode with oil companies (it needs to make daily payments) while the Airports Authority of India, whom it owes over Rs 200 crore, has extended it credit till December 31. All in all, the airline has liabilities of over Rs 2,000 crore towards various vendors, lessors and even the taxman.
“Further to your resignation, the management has approved your release from SpiceJet wef 31 December 2014 … If you stand on your decision to resign we will be relieving you with your last working date with SpiceJet as December 31 2014,” a letter seen by FE said.
According to a DGCA rule put in place a few years back, pilots have to serve a six-month notice period if they resign, unless the airline reduces this by itself. In most cases, airlines want pilots to serve the full notice period because of the time and investment required for recruits.
A SpiceJet source added on the condition of anonymity, “This is a very wrong move. As per the rule pilots have a six-month notice period, so whichever new airline they are joining has booked training slots accordingly. Asking them to leave early will mean a salary loss for pilots because they cannot join the new airline early and will have to stay home.”
SpiceJet is keen to reduce its pilot strength because it has sharply cut its fleet in the past few months to cope with its precarious financial position. It currently has about 200 B737 commanders, though it needs only about half of that. Compared to 35 Boeing 737 aircraft in July, the airline today has just about 20. Of this, only 18 are operational, as confirmed by COO Sanjiv Kapoor on Friday. Additionally, the airline has 15 smaller Bombardier Q400 aircraft that fly regional routes. SpiceJet is currently operating 230 flights a day, down from about 340 in July 2014.
Incidentally, the airline’s white knight and ex-promoter Ajay Singh wants to restore SpiceJet to its lost glory by regaining the fleet and network strength after he takes charge of the airline. FE had reported in its December 22 edition that Singh was in talks with lessors to take back aircraft that have been returned over the past months.