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For SpiceJet to stay afloat, some crew will have to deplane
Summary
The airline aims to save ₹100 crore annually through cost-cutting measures, including manpower rationalization.
Budget carrier SpiceJet has decided to lay off about 15% of its staff, or about 1,500 employees, amid other cost-saving measures following a two-thirds reduction in its fleet size. The cash-strapped airline expects to save around ₹100 crore per year from these measures.
“As part of our turnaround and cost-cutting strategy, following the recent fund infusion, SpiceJet has initiated several measures, including manpower rationalization, aimed at achieving profitable growth and positioning ourselves to capitalize on the opportunities in the Indian aviation industry," said a spokesperson for SpiceJet. “Through this initiative alone, we anticipate an annual saving of up to ₹100 crore."
SpiceJet recently completed a capital infusion aggregating to ₹744 crore by allotting shares and warrants on a preferential basis. Last month, the airline received an in-principle approval from BSE to raise ₹2,242 crore by issuing shares.
“The new investors who have come on board do not want to pay free salaries," said a person familiar with the developments at SpiceJet, adding that pilots are unlikely to be affected in the layoffs.
“The layoffs have already started. It will be across all categories of operations," said another person, pegging the number of employees to be laid off at 1,500. “The plan is to complete this drive by March 31."
Both of them declined to be identified.
SpiceJet had about 10,060 employees, including 7,131 permanent employees and 2,929 staff on contract, as per its annual report for 2022-23.
That year, the airline’s expenditure on employee benefits stood at ₹880 crore, or about 9% of its total expenses of ₹9,880 crore.
The airline is expected to terminate the employment of nearly 15% staff or around 1500 employees by the end of the current financial year, a person aware of the matter told Mint.
SpiceJet’s net fleet size has dropped to 41 aircraft from 120 aircraft in 2019. Of these, about 10 are in wet lease, meaning aircraft leased along with pilots and cabin crew.
In 2017, SpiceJet had placed a firm order for 155 Boeing 737 MAX aircraft, with options for another 50 such planes. The airline, however, has been unable to take deliveries beyond 13 aircraft, largely on account of financial challenges to make upfront payments.
The airline doesn’t plan to alter the order placed with Boeing for the MAX aircraft, said the first person mentioned earlier.
While SpiceJet is downsizing, IndiGo, Akasa Air and Air India are expanding their fleets, which is likely to require additional hiring.
SpiceJet is due to complete a second tranche of capital infusion via equity and warrants. Under the first tranche, the airline had aimed to use ₹54.5 crore for employees.
The pandemic took a severe toll on SpiceJet, adding to its losses. Consolidated net loss widened from ₹302 crore in FY19 to ₹937 crore in FY20, ₹1,030 crore in FY21, ₹1,744 crore in FY22, and ₹1,513 crore in FY23.
The airline’s market share too has been falling, from 16.5% of the domestic aviation market in December 2019 to 5.6% in December 2023, as per data from the Directorate General of Civil Aviation.
