BackSpiceJet goes for management shuffle amid rising competition
In the past few weeks, SpiceJet has asked its heads of human resources, commercial and engineering to leave
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New Delhi: SpiceJet Ltd is undertaking its biggest top management shuffle in recent years under a new head, as it prepares for increased competition and is possibly looking to make itself more attractive to investors.
India’s second largest budget airline, which hasn’t made a profit in two years, has fired several heads of departments in recent months and more are likely to be asked to leave, said an airline official who declined to be named.
Last fortnight, SpiceJet’s new chief operating officer Sanjiv Kapoor called chief technology officer Virender Palto his room and asked him to quit on the same day. Pal, who has surrendered his mobile phone to the company, could not be immediately reached for comment.
The airline, in the past few weeks, also asked its heads of human resources, commercial and engineering to leave.
“There is terror in the organization. No one knows who is next," the SpiceJet official said.
“There are two-three heads of departments more to go," said a second SpiceJet executive, who also declined to be named. “Expect it in the next few days."
S.L. Narayanan, group chief financial officer at media baron Kalanithi Maran’s Sun Group, which owns SpiceJet, confirmed the large-scale management changes and said replacements are being hired.
“Fact of the matter is that there is a new leader (Kapoor) at SpiceJet and he was recruited because the previous incumbent (former CEO Neil Mills) resigned," Narayanan said. “You should be well aware that management churn is something that is normal. In fact, you will see more poaching as the Indian aviation industry becomes bigger."
India’s already strained aviation industry will see more competition in the next financial year when Tata Sons Ltd’s new airline joint ventures AirAsia (India) Pvt. Ltd and Tata SIA Airlines Ltd begin operations.
SpiceJet, which has 57 planes and runs 350 daily flights, posted its biggest ever quarterly loss— ₹ 173 crore—in the three months ended 31 December, from a net profit of ₹ 103 crore a year ago.
The Gurgaon-based airline is expected to report a record full-year loss of about ₹ 1,186 crore in 2013-14, equivalent to its combined losses from 2007 to 2013, according to consulting firm Capa.
SpiceJet appointed consulting firm Bain and Co. to conduct a survey asking all its employees to rate their reporting managers. The survey, with ratings on nearly 400 managers, was completed on Friday and submitted to Bain directly.
The survey will be tabulated “in the next few days" and “people decisions will be made within two weeks", said the second official.
In his first meeting with senior officials in October, Kapoor made it clear he was going to start shaking the tree and people who didn’t match up to their roles “will fall", the same official said.
“Kapoor is making investments in strengthening the team and adding further management depth for the future. People like Kaneswaran (Avili) from Tiger Airways bring in the right kind of expertise required to improve the way we go to market," Narayanan said.
SpiceJet hired Kaneswaran Avili, who has previously worked with AirAsia and Tiger Airways, as its chief commercial officer in February, and Sudhakar Kondisetty as its senior vice-president (information technology), and abolished the position of chief technology officer.
It also brought in Jet Airways (India) Ltd’s Ashok Gopinath as vice-president (engineering), Fares Kilpady as senior vice-president (revenue management) and Shilpa Bhatia as senior vice-president (sales). The airline also changed the role of Anurag Jain from senior vice-president in charge of revenue management and network planning to network planning and strategy.
“More people will join; they are serving their notice periods in other firms," the second SpiceJet official mentioned earlier said, adding, “Any meaningful turnaround requires senior management cleanup."
Former Jet Airways CEO Steve Forte said SpiceJet’s promoters need to show patience.
“Many private airline owners believe in ‘instant miracles’ and have a difficult time accepting reality. And the reality is that the market is not doing so well for everybody and not only for Spice," Forte, based in New York, said in an email. “A new management and perhaps a new strategy that includes network redesign and a new approach to service takes time to implement and for the market to accept it so, in reality, we are talking of at least one year, if not two, before Spice could come out of the hole."
He added that for the airline sector to turn profitable, India’s economic growth has to improve and instill confidence in investors. “So the question is: How much patience are Spice shareholders going to have by providing recapitalization until such time as all elements come together successfully?" Forte said.
He added that SpiceJet maybe eyeing foreign investment by showing some sort of a turnaround in the next few months. SpiceJet shares dropped 2.60% to ₹ 12.76 a share on Monday and are at their 2008-low on BSE even as the benchmark Sensex dropped 0.82% to 20,946.65 points.
“There are possibilities for the long-term survival of SpiceJet with a potential foreign participation or a merger," Forte said.
He added that budget airline AirAsia India’s entry may not hurt SpiceJet much initially. “If indeed Air Asia India will compete against Spice, it will not be over its entire network but most probably over one or two routes. If so, Spice should be able to fight off the threat successfully. I do not believe Spice is ready to throw in the towel yet."
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