 "CFO quits, SpiceJet witnessing churn in management again?")
New Delhi: Ailing airline SpiceJet continues to look for fresh funding but is it witnessing a fresh churn at the senior management level?
Our sources tell us that the Chief Financial Officer R Neelakantan has quit just ahead of September quarter results’ declaration though the airline denies this. Neelakantan took over from Sam Issac around March this year and he is seen as a trusted lieutenant of the promoters, the Maran family.
The airline says R Neelkantan is on sick leave and VP Planning Kiran Koteshwar is acting as the interim CFO. This is Neelakantan’s second stint with the airline. SpiceJet saw a number of senior level exits around March this year and at least one more senior executive has quit the airline in the September quarter.
Multiple sources we spoke to said SpiceJet is expected to post a quarterly loss of nearly Rs 300 crore for the September quarter, which is a vast improvement year on year over Rs 508.93 crore net loss in the September quarter of 2013-14. But it is much higher than the June quarter net loss of Rs 124 crore. SpiceJet posted the highest net loss in its history for the 12 months ended March 31 this year at Rs 1003 crore against Rs 191 crore in FY13.
One person closely associated with developments at SpiceJet pointed out that though the loss expected for the September quarter was a vast improvement year-on-year, one must take into account several factors which should have narrowed the airline’s loss further: reduction in the airline’s capacity which would mean lower operating costs, reduction in fuel prices which also aid costs and an overall improvement in the domestic aviation market. A SpiceJet spokesperson declined comment on September quarter results since they are yet to be declared.
Our sources also tell us that SpiceJet is reducing fleet by returning five Boeing 737-800 aircraft to lessors within November, two of which are new aircraft. Again, the airline has denied this, saying the aircraft being returned are a mix of older and non-standard ones and were never part of the long term fleet plan. “Aircraft in question being returned are a mix of older, non-standard 737-800s and 737-900ERs which are not a part of our long term fleet plan. Any temporary dips in fleet will be met through short-term dry leases,” the spokesperson said.
He did not provide the size of fleet after returning aircraft; SpiceJet has 15 Q400 aircraft besides the Boeing fleet.
In the last few months, SpiceJet has seen its market share rising steadily as almost-daily fare discounts have helped stimulate the market. For several months in a row, the airline has been the second largest in terms of passengers in the domestic market. But is continuous market stimulation also leading to an increase in revenue per passenger and will this strategy help the airline get to profitability? Are differences over fare strategies andfinancials leading to rapid exits from the top echelons of SpiceJet?
SpiceJet’s Chief Commercial Officer Kaneswaran Avili says “Yes, it is leading to more unit revenues (RASK or revenue per available seat kilometre). In Q1 FY15 our operating RASK increased by approximately 10%. Note this is operating RASK and does not include revenues, if any, from non-operating activities which can sometimes inaccurately inflate RASK numbers……Anything that increases RASK and helps to move the needle closer to profitability is good for the airline.”
One source quoted earlier points out that though frequent discounts do stimulate the market, this cannot be the only strategy for SpiceJet to turn around - the airline lacks a low cost base to effectively leverage the benefits of increased revenues. This source points out that in 2012-13, the gap between per unit cost of SpiceJet and market leader IndiGo was about 10% but this has worsened in 2013-14 to about 12%. Anyway, IndiGo’s revenue growth is higher so it enjoys double the benfits in a manner of speaking.
Unless there is pricing discipline in the market - which means everyone agrees to price spot fares and 7-day advance purchase fares higher while discounting fares booked much in advance, SpiceJet’s market stimulation efforts may continue to be quetioned.
 "Russian drones over Poland: Trump’s tepid reaction a wake-up call for Nato?")
 "As Russia pushes east, Ukraine faces mounting pressure to defend its heartland")
 "Why Mossad was not on board with Israel’s strike on Hamas in Qatar")
 "Turkey: Erdogan's police arrest opposition mayor Hasan Mutlu, dozens officials in corruption probe")
 "Russian drones over Poland: Trump’s tepid reaction a wake-up call for Nato?")
 "As Russia pushes east, Ukraine faces mounting pressure to defend its heartland")
 "Why Mossad was not on board with Israel’s strike on Hamas in Qatar")
 "Turkey: Erdogan's police arrest opposition mayor Hasan Mutlu, dozens officials in corruption probe")
