NDTV Profit Exclusive | SpiceJet Preps For Turnaround 2.0 | NDTV Profit
#NDTVProfitExclusive | #SpiceJet preps for turnaround 2.0, clears all GST dues.
CMD Ajay Singh discusses the revival plan and more with Tamanna Inamdar. #NDTVProfitLive
CMD Ajay Singh discusses the revival plan and more with Tamanna Inamdar. #NDTVProfitLive
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00:00that will this airline survive and revive? To speak on that, I'm joined now by the CMD,
00:06Mr. Ajay Singh. So great to have you on the NDTV network, Mr. Singh, and thank you for taking out
00:11the time to speak to us at what I'm sure is a busy time. Now, we're speaking also on an
00:16interesting day when there has been an announcement from your company that GST dues have been cleared.
00:22Let's start there. What are the dues that have been cleared and is this what we're going to see
00:28as the primary utilization of the 3,000 crores raised, which is to clear outstanding dues?
00:36Well, the primary use of the raise is to increase capacity, go from the current 25 aircraft that
00:46SpiceJet is flying back to 100 aircraft airline in the next two years. That's the primary
00:54objective of the raise. We were already close to 100 aircraft airline in 2019 and it is our
01:01intention to get back to being 100 aircraft airline over the next two years. That's the
01:07primary objective. Of course, another objective of the raise is to clean up the balance sheet,
01:15clear up whatever is due and payable, settle with all our partners who are owed money primarily for
01:23the period when aircraft are not flying during COVID and during the grounding of the MAX aircraft
01:33in 2019 and for three years there upon. So the idea is that we clean up our balance sheet,
01:40restructure all existing liabilities and have the space and the strength to quickly go back
01:49into being 100 aircraft airline in a market which is absolutely booming and where only
01:57of the population of 140 crore people today, 5 or 6 crore Indians fly. So SpiceJet knows how to do
02:08this. SpiceJet has been an airline which has been around the last 18-19 years. We've flown
02:14with very high occupancy with a great deal of success. We've brought about a turnaround in
02:232015 which was most unexpected and the envy of many. We feel that we are in a better position
02:31to bring about another turnaround here. SpiceJet already has all the experience and infrastructure
02:38to be a 100 aircraft airline and so the primary objective of the race is to quickly get back
02:44being a 100 aircraft airline. Okay, so that is the primary objective. But then the back of the
02:49envelope calculation is that out of that 3,000 crore, about 2,400 crore is going to go towards
02:55dues. About 600 crore is left. I think what you've also penciled in for fleet expansion is about 370
03:03crores. So I come back to the question that some are asking and that we started with. With 3,000
03:10crore fundraise successful, yes, that's a checkmark. But can the airline actually survive
03:15and revive? How much more is required? Firstly, your number of 2,400 is a little overstated
03:24in our opinion. And what we've done is we've penciled in about 800 crores towards revival
03:33of aircraft that we have on the ground. Remember, the aircraft are difficult to come back
03:38in the global aviation market at this point of time. SpiceJet has this great advantage that we
03:43have about 30 aircraft which are just sitting on the ground which need some capital to put them
03:49back in the air. So the first objective of SpiceJet is to see that these 30 aircraft
03:55that are sitting on the ground, several of which are actually owned by SpiceJet,
04:00that those go back in the air. And for that, we've provided a significant amount of money
04:05from this fundraise. In addition to that, like you correctly said, we've allocated some money
04:11towards getting in aircraft on lease. And this money has been allocated
04:18towards some advance payments, etc., that have to be made for those aircraft.
04:23So the plan is to get up to about 40 aircraft by the end of this financial year,
04:28to get up to close to 80 aircraft by the end of the following financial year,
04:32and 100 aircraft thereupon. So we think it's a plan that we can well achieve. And
04:41we will actually surprise all of you on the upside.
04:45You know, I think this is the question that you get the most.
04:51Let me just say that, you know, we have proven you guys wrong. We've proven your channel wrong
04:56repeatedly. You know, because you guys have said so many times that SpiceJet will not survive.
05:02And we've shown you every time that you're wrong. This is an airline that refuses to die,
05:07it will not. And it will be a vibrant player in the Indian aviation space. Again,
05:11there is absolutely no doubt of that. All right. So now let me respond to that,
05:15Mr. Singh. We hold, as journalists, a healthy dose of skepticism for any claims made by anyone.
05:23But having said that, for the health of the Indian aviation sector,
05:27it's better that there are more players. We want SpiceJet to survive. But all claims being made
05:35will be examined as they must. I'm sure you appreciate that.
05:39We fully appreciate that. But every time a claim has been made by NDTV,
05:44it is our mission to ensure that that claim is proven wrong.
05:48Okay. If that helps the airline survive, then we're happy for that. We're happy for the outcome.
05:54Okay. Now, having said that, you said that the math was a little bit off. Let me just come back
05:58to that. So 3,000 crores, you're saying at least 800 crores goes towards CAPEX. So 2,200 crores
06:06towards due, is that the right math then? No. Actually, what is going towards due is
06:12close to about 1,400 crores because there are a lot of settlements in the works. We have another
06:18800 crores of reserve capital that we are keeping to ensure that we have enough working capital and
06:26we have enough sort of reserve. So around 1,400 crores is going towards dues. About 800 is going
06:38towards refurbishing the planes and getting a new aircraft and 800 is capital that we are keeping.
06:47Okay. Now, let's get to what that pathway looks like and some of the things from the customer
06:54point of view, the niggles. So some hitches, which we've seen at certain airports, airport
07:01dues, et cetera, would that take priority? Some of the furloughs that have been announced,
07:06do you look at reversing that in a certain timeline? Well, as you know, we've cleared all
07:13past salaries of employees. Everybody is completely current and up to date.
07:18We have also cleared DST dues. We are clearing other statutory dues as we speak.
07:25So in terms of the airports, there's actually very little money due to them. I think one of
07:35the advantages of being on the advanced system that we have been at airports and with oil
07:41companies for the last seven or eight years is that very little money is actually due to them
07:46from the past. So they will be settled. Those are relatively smaller pieces of this whole puzzle.
07:54And we will find settlements for them really soon. Now, you heard about some advanced payments that
08:00have been requested by certain airports, which came in the media, but those are very small
08:10amounts and those will be settled very, very quickly. What about the 150 crew sent on furlough
08:18in August? Now that there is liquidity that has come in, is there a plan to reverse this? Because
08:24surely if you're going to have this ambitious scale up of fleet, then you need the crew as
08:30well. So what is happening on that front? I think for sure. I mean, these are wonderful
08:35people who we've trained. And by the way, SpiceJet was perhaps the only airline that actually kept
08:44the entire staff at SpiceJet during COVID. We kept them because we felt that they would have
08:54absolutely nowhere to go if you were to let them go. And so we are very conscious of the fact that
09:02we need to get them back on the roads as soon as possible. And as we scale up and as we roll out
09:08this pretty ambitious scale up plan, of course, all that crew and all that staff is going to come.
09:16Let me just come to the bit of the fundraise. So the first round of fundraise,
09:22successful, some marquee investors have come in. Then again, some have offloaded a little
09:27bit of stake, but then that's part of usual business. The question everyone wants to know
09:31that is another fundraise round the corner or will that be required to reach that goal of 100
09:37aircraft by 2026? Is that on the horizon? I think the plan to 2026 is fully funded.
09:48So no more fundraise is required for that. I think we are well on our way to on that plan.
09:55And we'll see what happens beyond that.
09:59How does the math work on just what we spoke about? So the dues paid, the amount of capex left,
10:07I know you have about 36 grounded fleet, which you will first revive. But then if you want to
10:13get to the number of 100, so you need 30 odd more. Does the math really fit with the amount of funds
10:19raised so far? When you take planes on the secondary market, you don't have to pay for the
10:25planes. What you do is you pay advance lease rental. So two months or three months of lease
10:31rental, we've taken all that into account. We've taken some aircraft deliveries from Boeing
10:39towards the end of that plan, but not very many given the current issues that Boeing is facing,
10:47we hope that they will resolve really soon. But just to make sure that our plan remains robust
10:53and strong, we've taken very few deliveries from Boeing. The rest of the planes are actually coming
10:59off the secondary market. And there seems to be a decent amount of availability going forward.
11:07So we've taken advance payment for those aircraft. So how many planes would in this lot of 100 be
11:12from the secondary market in the final calculation? So around 35 or 40 planes are from
11:22the secondary market over the next two, two and a half years. And we have visibility for quite a
11:29large number of those aircraft already. We've taken a few, like I said, from Boeing towards
11:34the end of that period. And we'll see if Boeing is able to provide them, then great. And because
11:40we still have an outstanding order with Boeing for about 50 aircraft. So if things come back
11:47upstream and they're able to provide those, then great. And if not, those will also have to be
11:52procured. So if I look back at the two primary reasons which have seen SpiceJet face turbulence,
12:00one was COVID, which was faced by everyone and the second was Boeing itself. In that sense,
12:07leading up to my question, is it time for a sort of a reset when you look at the rest of your fleet
12:13and not look at Boeing primarily? Is that something that you're thinking of as well?
12:18I think we'll exercise all possible options. It's not as if the other manufacturer also has
12:25a great deal of capacity. So it's a tough market. I think Boeing has gone through a tough time.
12:32We'll see how things really pan out. But I think the preference is to stick with existing partners
12:41while exploring all other possibilities. Just a couple of questions on what the
12:47industry is looking like right now, Mr. Singh. We have a peculiar sort of breakup in our aviation
12:53industry. Airlines die over here with alarming regularity. Kudos SpiceJet has managed to stay
13:01above ground. But that is a feature of the Indian aviation industry. And then you have
13:06two primary players now, one with an outsized share. SpiceJet gets to 100 by 2026. All of
13:14that is in plan. How do you manage to crack this in terms of market share?
13:21Well, our concern has never particularly been market share. As you increase the fleet,
13:26the market share goes up. This is part of the way this works. We were at close to 20%
13:32market share in 2019. And as we increase our planes, market share will keep going up.
13:38I don't want to put a target market share, but I think a healthy industry requires multiple players.
13:45The duopoly that exists today is perhaps long-term not the best thing to happen either for consumers
13:52or for this industry. And not only SpiceJet, I would wish the other players also the best,
13:59and I hope that we can have multiple players in the system. We of course need to ensure going
14:06forward that the industry remains healthy. And for that, it's important that we bring down
14:14the cost of aviation in terms of the taxes that are being charged, the complexity of
14:21the system, etc. We need to address those issues. And we need to address the issue of yield.
14:28India has been one of the lowest yield markets, aviation markets in the world. That's improved
14:34over the last two years. But I think it's important that airlines are going to be profitable,
14:40so that they can use the profits and deploy those profits towards growth that the Indian
14:46market needs. What is the path to profitability for SpiceJet, sir?
14:53Well, from our perspective today, a large amount of our cost actually is because of
15:00the fixed costs that we are incurring because of the grounded fleet. As you start putting that
15:06fleet back in the air, remember that today we are paying for that fleet. We are paying lease
15:11entry for the fleet. We are paying parking charges for the fleet. We are paying an outsized
15:15amount of money for infrastructure to maintain that fleet. As you start bringing that fleet back,
15:22that fixed cost will get amortized over the number of planes that we have.
15:25And you'll see profitability come quite quickly. In fact, our projection is that
15:32you will see it quite early on that the airline will turn profitable.
15:37Give me a number, sir.
15:39I don't want to give you a number because then I don't want to read in your channel.
15:48You get to tell me I told you so.
15:55But we have made commitments in our business plan to the incoming investors. We will certainly try
16:01and meet those commitments that we made. Well, that was SpiceJet's management on
16:08what to look ahead in that.