Ajay Singh: The turnaround man
The SpiceJet chairman talks to Mint about his Cornell days, making India a global aviation hub, and the need for synergy between private and public sectors
A meeting with SpiceJet’s chairman Ajay Singh, the “turnaround man” of Indian aviation, takes weeks to materialize. And finally, when we meet on a muggy monsoon day in Delhi, it comes at a time when domestic carriers are being hammered by high jet fuel prices, a weaker rupee, and intense competition that forces them to keep fares low.
“The aviation sector is under pressure,” says Singh, 52, as he settles down at Mister Chai, a cafe at New Delhi’s ShangriLa Eros Hotel. “But, there are a few positives.”
Singh, who is credited with turning around SpiceJet from the verge of closure in 2015, prefers to see positives in every challenging situation. “The inherent demand is still strong,” he says, helping himself to sandwiches from the plate in front of him.
He explains there is a possibility of raising fares in the near future, which would, in turn, increase airlines’ yields. “Also, the government is more than willing to look into the problems of the sector and frame policies to bring down costs.” In his opinion, this was not the case earlier.
SpiceJet, headquartered in Gurugram, is India’s fourth largest airline in terms of passengers carried. In July, SpiceJet recorded the highest passenger load factor—a measurement of airlines’ capacity utilization—among domestic carriers, for the 40th month in a row.
The airline started off as an air taxi service founded by industrialist S.K. Modi in 1984. In 1993, it pivoted to a passenger airline and was renamed ModiLuft when it partnered with Lufthansa. The German airline provided pilots and trained ModiLuft’s Indian staff including pilots, cabin crew and mechanics. ModiLuft ceased operations in 1996.
It was acquired by Singh and other investors a decade later and renamed SpiceJet. Singh wanted to position SpiceJet as an airline that could offer a rich flying experience at low fares. The idea, he says, was to have 100 airplanes, each named after a spice. Today, SpiceJet has over 100 aircraft, all named after spices found in the subcontinent, like Ginger, Garlic and Pepper. “We didn’t imagine then that we would operate with such a large fleet at some point and would have to name so many planes,” Singh says.
Singh says his initial stake in SpiceJet was around 20%, which came down to about 5-6% in June 2010 when media baron Kalanithi Maran acquired a 37.7% stake. Subsequently, he sold his remaining shareholding. When he returned to run the airline in January 2015, buying the stake from Maran’s Sun Group, it was debt-ridden and on the verge of closure. Friends advised him to stay away, but Singh had a strong feeling that there was a possibility of a turnaround. “There was still great potential in aviation, and oil prices were coming down,” he says. “I thought nobody would blame us if the airline died but if it succeeded, we would have stories to tell our grandchildren.”
Under the Marans, in 2014, SpiceJet had to ground planes, as lessors, oil retailers, and staff were not paid in time. For the fiscal year ended March 2014, SpiceJet’s net loss stood at ₹1,003 crore compared with a net loss of ₹191 crore in the preceding financial year. The stock, which had been trading close to ₹80 a share, fell to ₹15 a share during 2014. The airline ended 2014-15 with a loss of ₹687 crore, and a debt of ₹1,240 crore. Then, things changed. Global fuel prices tanked and a low-cost execution strategy worked. Singh had achieved a turnaround.
And it was a sustained one, at least till very recently. Last month, the company reported its first loss in 14 quarters, owing to higher expenses, a weak rupee, foreign currency losses and a one-time expense for provisioning on account of an arbitration award. Net loss for the quarter ended 30 June stood at ₹38 crore compared with a profit of ₹175 crore in the year-ago period.
Singh was born in Delhi to businessman Vijinder Singh and his wife Kalpana. The family lived on Barakhamba Road and had interests in real estate and fashion accessories. Singh went to St Columba’s School where he excelled in studies and sports. He played cricket, table tennis and also captained the school football team. He went on to study textile engineering at the Indian Institute of Technology (IIT), Delhi (1984-88), and followed it with a master’s in business administration (MBA) from Cornell University.
It was in the US that Singh started taking a keen interest in the functioning of government and policy-making. As the president of the India Association at Cornell, he took part in many discussions on events back in India.
“We discussed, like arm-chair politicians, what India needed to do and why things were going wrong back home,” Singh recalls fondly. “There was a feeling that if educated people like us don’t go back to India and do something, things wouldn’t change.”
Singh returned home in 1992 and joined the family business. “But, I was still very interested in working for the government, where I thought I could make a difference,” he says.
Opportunity came knocking while Singh was studying law at Delhi University in 1996. Bharatiya Janata Party (BJP) leader and then Delhi transport minister Rajendra Gupta, his neighbour from Barakhamba Road, tapped him for the city’s transport corporation board. Singh was asked to formulate a plan to turn around the bankrupt corporation with 40,000 employees. Over the next two and half years, he urged the corporation to buy more buses, expanding its fleet from 300 to over 5,000 buses which, in turn, increased revenue. He also roped in buses from private operators.
“We looked at global models for public transportation and tried to do things a little differently to make public transport a success,” Singh says.
He got a chance to put his policymaking theories into practice when, in the late 1990s, he met BJP politician Pramod Mahajan, with whom he forged a close friendship and working relationship.
In 1998, when Mahajan became information and broadcasting minister, he brought on Singh as officer on special duty (OSD), where he played a key role in revamping Doordarshan, and launching DD Sports and DD News.
“I was very interested in politics. I studied how the White House functioned, and had some ideas on how the PMO (Prime Minister’s Office) should function,” Singh says.
One of his key suggestions was putting in place a national policy for telecom and information technology. When Mahajan assumed charge of the telecom portfolio in 2001, Singh helped in drafting the National Telecom Policy and the Information Technology Act. He also played an important role in advising the ministry to reduce the cost of mobile telephony.
“Mr Mahajan was smart… He would push bureaucrats into delivering. And he gave a lot of freedom, if one had new ideas,” says Singh.
It was under Mahajan’s stint that the state-owned BSNL ventured into mobile business and invested heavily in fibre infrastructure. The incoming charges on mobile calls were also dropped. But the BJP-led coalition lost the 2004 general election and “suddenly, I was out of job,” Singh says. (But he remained close to the BJP and is credited with coining the popular “Ab Ki Baar, Modi Sarkar” slogan ahead of the 2014 election.)
It was during this time that Singh decided to get back into business. His first big investment was of ₹5 crore in the remnants of ModiLuft (renamed Royal Airways by then) in October 2004. The revamped airline was called SpiceJet.
Today, SpiceJet operates on short-haul international destinations such as Dubai, Colombo, Bangkok and Kabul. It plans to fly to several new countries in the next few quarters as well as start low-cost, long-haul flights, Singh says, without divulging details. He wants India to become a global aviation hub.
“Airlines have a larger role to play in future. It is not only domestic connectivity; Indian carriers will have to focus on international connectivity as well,” Singh says. “We can’t have a situation where two-thirds of international connectivity (from India) is being done on networks of foreign carriers. We can never create an aviation hub in our country otherwise.”
Singh feels effective communication is necessary to bridge the inevitable gap between the private sector and government. “More dialogue needs to take place between private and public sectors, and there need to be more joint policies. Mr (Atal Bihari) Vajpayee had spoken about it in the 1990s and formed various committees to realize this. It is fructifying now and where it is not, initiative needs to be taken from both sides,” Singh says.
There have been unintended consequences, he says, giving the example of taxes on the aviation sector. While the government now understands that aviation shouldn’t be taxed as a luxury sector, the higher tax structure resulted in private airlines becoming more cost-efficient, putting them at par with their global peers. Passenger growth of 20% per year is among the best in the world, Singh says.
“If we get a level playing field, we can give all of them a run for their money,” Singh says. “We need to build our own international carrier, our own hubs, because it is clear that there is demand.”
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