<b>Anjuli Bhargava:</b> Why SpiceJet flew into bad weather

The experience of the low-cost airline demonstrates that success in one business does not guarantee success in another and that wholesale changes don't always work

The last couple of weeks almost all the newspapers and websites have published articles about low-cost airline SpiceJet and its possible buyout by new investors. Troubles for the airline seem to have piled up and it remains financially strapped. I'm sure its current management is trying its best to manage the crisis and I wish them luck. No one - the industry, the government, the flying public, you or me - wants to see another airline go the Kingfisher way.

The way things have developed holds some lessons for promoters and management of airlines - indeed any business - in India, although the string of airlines that have pulled down the shutters in the past - Damania, East West, Modiluft, MDLR, Paramount, NEPC, Kingfisher - should have taught them some already.

First, success in one business does not guarantee success in another. In both Vijay Mallya and Kalanithi Maran's case, they have done well in liquor and television businesses respectively (although both had virtual monopolies) but neither seems to have come to grips with aviation. Even Naresh Goyal, who has no other businesses, suffered the moment real competition came into the sector. What this implies is that it is easy to make money when you are a virtual monopoly; yet success in one sector is not a guarantee for success in another.

 

Second, at the first whiff of trouble, you can't just look towards consultants to solve your problems. Consultants have their own uses and they must be leveraged (I borrow this word from their lexicon) to that extent. But outsourcing your network - the heart of the business - as both Kingfisher and SpiceJet did, is a bit like Business Standard hiring McKinsey for advice on story ideas. It's a ludicrous idea. If you are an airline and you don't have the competence to decide where you ought to fly and where you don't, you truly have a problem on your hands. What is that entire network management team doing, one may ask.

Third, micro-managing a business that you don't as yet fully understand doesn't make sense if you have a good bunch of professionals doing the job for you. In the case of SpiceJet, for instance, neither Maran nor his aides seem to have real insights into the running of an airline, but they did have a strong and competent board and several professionals there to do the job for them. They chose instead to peer over their shoulders constantly, according to former employees. We have seen where this has got the company.

Then, running any business through a conduit is definitely not the ideal way. Your own staff doesn't know what you want, whether the orders they hear come from you or your trusted aide. And while you may trust that aide totally, remember your orders and wishes are conveyed through his filter. It may work for a while but it is likely to give trouble in the long run. There is no replacement for speaking your mind and speaking it directly to those who are working for you.

And last, respect what you have got and try and nurture it; not just change for the sake of change. If you paid good money to buy something, you paid it because you saw some value, I assume. In the case of SpiceJet, there was a fairly large sum of cash on its books when Maran took charge. If he had changed little and just tried to build upon what he had, he might not have found himself where he does today.

The company came to the conclusion that the professionals on the rolls were too highly paid. So they got rid of some of them and replaced them with people who were not able to handle the task at hand and have now replaced them again with another set of people at far more inflated salaries. This party, of course, will not last but till Maran & Co wake up to this, it will be a huge drain on the bleeding company's finances.

Another point that this episode brings to my mind is that for some odd reason no Indian businessman or chief executive officer ever admits to having made a mistake. Acknowledging that you went wrong is the first step to correcting it. Even children understand that.