Low-cost airline SpiceJet will have to raise money to turn around the beleaguered airline, renegotiate contracts with vendors to reduce cost, get more planes to expand operations, and manage two fleets. In an interview with FE’s Sunny Sen, CEO Ajay Singh talks of his plan to revive the airlines in which he is now a majority share holder.
Excerpts:
Why did you want to buy the company back?
I can’t deny that there was an emotional connect. I had created the brand. SpiceJet was a brand that the whole country knew. There were other rational reasons. The oil prices were low, the Indian economy was looking good and aviation would grow with it.
Why did you exit SpiceJet?
I didn’t leave SpiceJet. I had a very small equity which I retained till the end. Though I was managing and controlling the company, the larger stakeholders got together and sold their stake to the Marans, and Marans took the control. I retained equity.
Couldn’t you have worked with them?
There was no proposal to work with them. They wanted to run it on their own.
Every contract within SpiceJet and its vendors are being renegotiated…
The cost base of SpiceJet on the long-term basis is reduced. We have to relook at the way we operate and of course the contracts contribute to the cost base. So I will see what best I can do to reduce the cost base.
Are you consolidating your fleet?
SpiceJet’s capacity has contracted a lot. While there will be consolidation — fewer destinations and more frequency — SpiceJet will look to increase its fleet. Currently, SpiceJet has some 50-aircraft order from Boeing.
That order comes from 2016…
In the intervening period, we will add more planes. We are looking at fresh induction of planes both by leasing them, and see if we can put a fresh order.
Have the lessors been paid?
All the lessors have been paid. In the last two months or so, SpiceJet has cleared all its statutory liabilities. We have cleared all our oil dues, we have repaid all the debt of the banks, we have made sure that all salaries have become current. We are negotiating with every past vendor to arrive at settlements with them, all the lessor settlement has been done and there is a payment plan that has been worked out with them.
World over, no low-cost airline operate with two fleets?
If it was left to me, I would not have bought a second fleet. Nevertheless, a second fleet exists, and now I have to see objectively if this fleet can make money. If this fleet can make money, it will stay, if it doesn’t make money, it will go.
Where are you on international tie ups?
We were approached by some international carriers for potential tie-ups. We will look at whatever proposal that comes our way. In terms of equity infusion from foreign carrier, I think it is a little premature now, and we need to stabilise the airlines.
Where will you get the money from?
A significant amount — R550 crore — has already been inducted. There is no paucity of funding options. The company is doing much better than we expected. The fund requirement is not what is was projected to be.
Nevertheless, we had engaged with investors, and we are talking to them with a reduced requirement. We will do probably some in May. That is more of comfort money.
What went wrong in the company?
I think the business environment was against the Marans. The oil prices went up. Also some mistakes were made. Little understanding of the aviation business. Chasing marketshare in the aviation space is something which is not sticky. They were dicounting upfront, and they were discounting when they were close to flying dates.
For Updates Check Company News; follow us on Facebook and Twitter