Troubles galore for SpiceJet, with lessons for IndiGo

Why the airline's troubles could soon mean trouble for you, me and other airlines

Things seem to be coming to a head for low-cost airline SpiceJet. The Directorate General of Civil Aviation (DGCA) has restricted its forward bookings to a month; this means the airline, which has been using advance money from future flights today, to fly the next day, cannot raise the amount it needs to keep flying.

The Airports Authority of India (AAI) has time and again threatened to put it on cash-and-carry; this would again mean it needs a daily cash flow. Pilots and staff are jittery and are said to be looking at FlyDubai, Etihad and Qatar to offer them jobs. There is clearly no knight in shining armour with a bagful of money; the airline’s claim that it has an investor willing to come on board — rumours have been doing the rounds for almost a year now — has so far proved incorrect.

Industry sources estimate promoter Kalanithi Maran would need to invest or bring an investment of at least Rs 1,500 crore almost immediately to stabilise the airline. Close to 6,000 employees can see their future bleak— and it does not look good. Sources say 18 of the airline’s 22 Boeings and 13 of its 15 Q400s are flying at present.

SpiceJet’s predicament has come at the time when Jet Airways has changed its strategy and seems less focused on the domestic market. GoAir remains a relatively small player in the sector (with only 19 aircraft, though it was launched a year before IndiGo, which now has around 100 planes). And, Air India needs to put its act together. In order words, IndiGo, already ruling the Indian skies, appears poised to monopolise the market, with no counterbalance.

Even if there are potentially serious rivals waiting in the wings — Vistara, for one — IndiGo has almost a 100-aircraft lead, and it will take a substantial amount of time for anyone to catch up. Already, IndiGo has been in a position to charge higher fares than rivals, as it becomes apparent that fliers have few options. It is IndiGo that offers the most frequent flights from most cities; and with SpiceJet tottering the way it is at present, the former might soon remain the only option. Passengers are now arguing they would rather pay a small premium for IndiGo and ensure they reached their destination, rather than taking the risk of having their flights cancelled (SpiceJet’s flight cancellations have become quite frequent of late).

Amid this virtual monopoly, the onus is now on IndiGo to ensure fares remain reasonable and complacency does not creep into its operations, as employees realise they are providing, arguably, the only option.

Airlines that attain a certain size usually find managing their staff harder. In the case of IndiGo, there have been instances — though few and far in between — of passengers complaining about a dilution in its customer-oriented approach. In general, passengers seem clear IndiGo is their preferred choice today, and the service offered is efficient and reliable, even if somewhat impersonal.

IndiGo President Aditya Ghosh says the absolute number of complaints the airline receives could be higher than others, as it carries the largest numbers of passengers. By ratio, Ghosh claims, IndiGo has the smallest number of complaints — on lost baggage, cancellations or passenger grievances.

An industry veteran and a former IndiGo employee, who does not wish to be named, says the airline’s handling of pilots — he calls it IndiGo’s Achilles’ heel — has always been surprisingly poor, and managing scale becomes a challenge, especially when most airlines do it well till they attain a certain size.

He also argues, when an airline grows and achieves success, it often gets caught in peripheral issues — profits, ancillary revenues, awards, trying to be the best place to work and so on — and loses sight of its core, the passenger. He warns IndiGo, like several others in the past globally, could fall prey to this if it does not watch out.

If IndiGo’s dominance proves to be a negative for the flying public and the sector in general, foreign leasing companies, already wary of Indian companies after the Kingfisher Airlines fiasco, are likely to further tighten the terms for Indian carriers. Leasing conditions and rates are likely to go up sharply, since such issues are now becoming a pattern with Indian carriers. According to Saj Ahmad, chief analyst at UK-headquartered StrategicAeroResearch.com, “if SpiceJet does not survive, leasing firms will be very hesitant about doing business with other Indian carriers. Whether people admit or not, Indian airlines and the wider Indian aviation market is wholly toxic. So, foreign direct investment is virtually dead; this is also why Kingfisher failed”.