The financial crisis at SpiceJet is hurting employees dearly. Spicejet is sending 80 Captains on LWP i.e. Leave without pay for 3 months starting September 21, a senior pilot who doesn’t wish to be named said.
The airline will call them back gradually as it deploys new aircraft into its fleet. SpiceJet plans to add seven new Boeing 737 Max starting from December.
SpiceJet faces several challenges. India’s aviation regulator has capped the number of seats the carrier can sell at 50% for eight weeks after it reported a string of mid-air malfunctions. The regulator has said the airline failed to build “safe, efficient and reliable” air services and in July summoned it to explain the incidents.
SpiceJet is returning older 737 aircraft which it inducted from Jet Airways while lessors have repossessed around four aircraft. Around 10 of its Q400 aircraft are grounded due to a lack of spares.
The struggling to-survive airlines, which have delayed August salaries, are allegedly defaulting on depositing tax deducted at source (TDS) with authorities and allegedly not depositing PF in employee accounts.
It is yet to give employees Form 16 for fiscal 2021-22 due to which they are facing issues in filing tax returns. It is also reportedly defaulting on some statutory payments too, claim sources.
Indian aviation is getting back on track. The traffic is matching the pre-covid levels and so the airlines have also started to reinstate salaries to pre-covid levels. The coronavirus pandemic had significantly impacted the airline industry, and the operators had resorted to cost-cutting measures, including salary reductions, to manage their financials.
All the major Indian carriers IndiGo, Air India, Vistara, AirAsia India and the newest airline Akasa Air has given a rise to their pilots in their salaries but Spicejet pilots are still on a 65% cut on pre-COVID salary.
Air India told its employees on August 26 that it will restore their salaries to pre-Covid-19 levels from September. The airline is also set to restore crew layover allowances and meal arrangements for pilots and cabin crew at the same time.
Battered by the Covid-19 pandemic, Air India and other Indian carriers had cut the salaries of their employees and reduced the layover allowances and meal arrangements of their flight crew to save money.
In April, Air India restored salaries to almost 75% of the pre-pandemic level. Then, it restored 20% of the flying allowances. At present, salaries are 35% below the levels before the Covid outbreak. Special pay for pilots and wide body allowances will be restored by 25%, after having been slashed by 40%.
Earlier in August, IndiGo partially reinstated the salaries of its pilots with the stabilisation and growth in its operations. The company announced an 8% increase in salaries of pilots with effect from April. In 2020, it cut the salaries of pilots by 28%.
While, IndiGo had also vowed to restore another 6.5% from November 1, 2022, if operations continue to run smoothly, pilots and commanders say that the “so-called” cuts taken by the top management of the airline for the year due to the pandemic have been in effect negated by the generous allotment of stock options.
Akasa Air, India’s newest airline, is leading on pay hikes for pilots, marking a reversal of the pandemic-era aviation squeeze that saw salary cuts and job losses globally. This is likely to set off salary increases at other carriers to ensure they have enough pilots as air traffic recovers amid fleet expansion and Gulf carriers embarking on a hiring spree.
Akasa raised pilot pay by an average of 60% — captains will start at INR 4.5 lakh a month and first officers at INR 1.8 lakh — from October. This is against INR 2.79 lakh and INR 1.11 lakh, respectively, at present.
Akasa’s pay bundle is 8-10% larger than what market chief IndiGo shall be paying its captains from November, by when salaries on the firm shall be absolutely restored, having been lower by practically 28% in the course of the pandemic downturn.
Crisis at SpiceJet
The cash-strapped airline’s troubles have been mounting in the past few months. Meanwhile, SpiceJet employees alleged delay in the disbursal of salaries for the second straight month, with the budget airline saying the payments were being made in a “graded format”.
“The salary disbursal was timely for June. Also, the salaries are yet to match the pre-COVID-19 levels. The salaries being disbursed to captains and first officers are not even 50% of what they used to be before the pandemic outbreak in March 2020,” a staff told news agency PTI.
SpiceJet on August 31 declared losses of INR 1,725 crore for the full year of FY 22. The airline also reported a loss of INR 783.60 crore for April-June of FY 23 as compared with a loss of INR 729 crore in the year-ago period.
SpiceJet incurred net losses of INR 316 crore, INR 934 crore, and INR 998 crore in FY19, FY20, and FY21, respectively. SpiceJet’s Chief Financial Officer Sanjeev Taneja also resigned and Ashish Kumar was announced as the new CFO of the company.
SpiceJet is looking to raise INR 2,000 crore through various means, including a stake sale, its largest shareholder and chairman, Ajay Singh, said. “We are exploring and ready to look at all options… on the table. We will ensure SpiceJet remains financially vibrant,” said Singh.
The airline had earlier this month said it was “in discussions with various investors (including a Middle East carrier and an Indian conglomerate) to secure sustainable financing.”
SpiceJet’s financial health worsened after Covid decimated air travel globally. The airline has suffered three straight years of losses while its market share has plunged to fifth from second largest. In late 2021, the airline had cash and cash equivalents of just INR 72.9 crore compared with total debt of INR 9,750 crore.
The no-frills airline is expecting Boeing to resume delivery of the 737 Max aircraft in October. SpiceJet plans to take delivery of seven planes, which will also bring in income through their sale and leaseback.
SpiceJet has also received an extension of up to three months for conducting its annual general meeting for the financial year that ended March 2022. Now, the Annual General Meeting (AGM) for the last financial year will be held on or before December 31, 2022.
SpiceJet’s domestic network covers the length and breadth of the country with the airline operating to 51 domestic destinations. Pioneer of the regional connectivity scheme, SpiceJet is the country’s largest regional player helping connect the remotest parts of the country by air.
The airline’s focus on providing direct flight connectivity to regional hubs not only ensures better connectivity but also has a cascading effect on tourism and economic activity in the region.