The story of the man who turned Spicejet around.
It was at the fag end of 2014 that the airline which was once making waves in the air seemed to be headed for the ground. Once India’s second largest airline by market share, SpiceJet was on the verge of shutting shop
People thought it was going the Kingfisher way that went belly up in 2013 after it was unable to repay its debt. By December 17 that year all SpiceJet’s aircrafts were grounded with debtors knocking at the doors and oil companies refusing to refuel its aircraft.
But then SpiceJet has survived—and how. And the person who gave Spice Jet wings again was Ajay Singh who had just turned 50. Barely three years later, the airline has grown manifold and is pushing for its place in the sun once again.
By late 2015, the airline steadily rose to capture India’s fourth largest market share and managed to fly at 93 per cent of its capacity.
The Gurgaon-headquartered airline also posted net profits of Rs 22.5 crore ($3.5 million) in the January-March quarter of 2016, the first time in almost two years. During the April-June quarter, the company’s net profit grew to Rs71.8 crore ($11.3 million) compared to a loss of Rs124 crore ($19 million) a year ago.
Much of that success was the handiwork of 50-year-old Ajay Singh, an Indian Institute of Technology, Delhi- and Cornell-educated businessman, who returned in early 2015 to the helm of the company he had built. Back in 2004, Singh had founded SpiceJet along with Bhupendra S. Kansagra—a Londonbased businessman—and ran it for almost six years before selling his stake to Chennaibased billionaire Kalanithi Maran in 2010.
Singh couldn’t have asked for a more challenging time to regain control of SpiceJet. But the risk seems to have paid off. Singh’s experience in running a low-cost airline along with some help from the government was largely responsible for that turnaround. Singh was at the right place with the right team at the right time.
The turnaround of SpiceJet
SpiceJet’s then promoter, Maran’s KAL Airways, was looking to rope in an external investor to bring fresh capital into the company. But it failed to attract any suitors— and by December 2014, it was struggling to pay staff salaries.
That’s when Singh emerged as SpiceJet’s white knight.
Fresh from his role in Narendra Modi’s wildly successful prime ministerial campaign—he was widely credited with coining the slogan, Ab ki baar, Modi sarkar (This time, Modi’s government)—Singh swiftly purchased Maran’s stake in the company in January 2015 for an estimated Rs 350 crore.
Since then, he appears to have pulled the low-cost carrier out of a rut. The company cut down on non-profitable flying routes while increasing frequency to routes that it identified as viable and lucrative. In addition, it also managed to renegotiate engineering and maintenance contracts for its aircrafts to bring down costs. The Bharatiya Janata Party (BJP)-led government—where Singh reportedly has a number of good friends— also extended a helping hand to the beleaguered carrier.
Turnaround master
This, however, isn’t Singh’s first such corporate turnaround. Singh is a nonconventional, street-smart investor who does not have an institutional approach to things but very hands-on like a typical Indian promoter. He is there to take calls even at 4 am when a deal is in the making.
As a young, 30-something MBA, also armed with a degree in law, Singh started out as a Director of the Delhi Transport Corporation (DTC). The public bus transport authority of India’s capital had 300 buses, 40,000 employees and was running heavy losses in 1995. After about 30 months in office, DTC was operating 6,000 buses and managed to break-even.
Singh eventually went to work as an advisor to the late Pramod Mahajan, India’s telecommunication minister and a rising star within the BJP in the late 1990’s. The period also coincided with a time when India was laying its foundation and policies for the eventual telecommunication boom.
SpiceJet started out as a low-cost airline in 2005 after Singh and Kansagra joined hands to purchase a defunct airline that was registered between the SK Modi group and the Lufthansa group. The airline, ModiLuft, flew for a few years before the partners had disagreements. But it had all the necessary flying licences in place, and the duo renamed the company as SpiceJet.
Singh invested Rs 10 crore and upon starting operations offered tickets at a base price of Rs 99. With a growing economy, the airline business was only beginning to take off. First-time flyers being lured by plummeting fares, and upstart carriers including SpiceJet, IndiGo and Air Deccan were challenging existing players such as Air India and Jet Airways with their low-cost model.
By 2010, when Singh decided to leave SpiceJet, the company had more than Rs800 crore in cash reserves. But an impending global economic crisis, coupled with sky-high oil prices and competition in the Indian airspace, meant that the aviation business was becoming a costly affair. But SpiceJet managed to reverse its downward spiral by 2015.
Back at the helm
Once back again, Singh and his team took the battle to the skies.
Ajay Singh carries immense experience in the fields of information technology and airline operations. Prior to SpiceJet, Ajay worked with top-notch corporates like Intel constructions Pvt. Ltd., Argentum Defence Systems Pvt. Ltd., Pan India Motors Pvt. Ltd., and many more established firms.
Whether running a company or advising the government on transport and tourism, Ajay has always emerged out as a master with a clear vision. It’s not the first time he has proven his decisions to be correct; in 2005 Ajay rebranded the entire ModiLuft and acquired the company, which was later renamed as SpiceJet.
Singh is an engineering graduate from IIT, Delhi. He completed his further studies in MBA from Cornell University, specializing in finance. Ajay was also elected as the President of the University of India Association
He hails from Alwar from his paternal side and Meerat from his maternal side. Prior to working with corporates, Singh handled his family business in real estate and fashion accessories
Ajay Singh was appointed Pramod Mahajan as a special duty officer to focus on revamping Doordarshan. After Singh joined, two new channels, DD Sports and DD News were launched. It’s not the first time; Singh has helped many failing companies to emerge as successors.
How Ajay Singh weaved his magic
On the day Ajay Singh took charge of SpiceJet, the situation was so that the director general of civil aviation (DGCA) had been told that the airline would stop operations from the next day, December 17, 2014, and all employees had been asked to stop coming to work.
Three years later, the airline has doubled its fleet (33 B 737s and 17 Q400s against 26 aircraft when Singh took over) and has placed an ambitious order for 100 B737 MAX aircraft for $11 billion.
On December 16, 2014, the airline had 49 daily flights; this has increased to 364 at present. Its aircraft are pretty full, yields have gone up (costs are down primarily due to a sharp fall in fuel prices) and several quarters have been profitable.
The airline has improved its on-time performance and is beating many rivals on this count. The airline has grown its staff: 4,912 to 6,725 at present.
It was Singh’s own innate sense of knowing what to do - and perhaps even more important of what not to do - that saw him through. So, in the absence of a magic wand, how did he do it? Singh mostly set about undoing all the mistakes made by the Marans, which were aplenty. He started with an almost total rejig of the routes. As much as 90 per cent of the schedule was reworked.
But perhaps the biggest weak spot is the fact that Singh has managed this almost totally alone. Industry sources argue that the airline today is too much of a “one-man show or a “single-man army”.
Spicejet needs to strengthen its management team significantly. It is too dependent on the promoter. With massive expansion planned from FY19, a stronger management team is critical.
Singh is Spicejet and SpiceJet is Singh. The fact that the whole thing hinges on one person adds to the risk. But challenges are what Singh specialises in: Spicejet in 2017 versus Spicejet in 2014 is clear evidence of that.