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April 12, 2024
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Two Indian private carriers IndiGo, the largest with an over 50 percent market share, and SpiceJet, which has been facing financial troubles are back in the news.

IndiGo was recently in the news when on July 2, its management was caught unaware as employees went on mass sick leave which saw almost 55 percent of its flights being delayed and some even being canceled. According to media reports the staff members took leave as competitive airlines were holding walk-in interviews. The mass leave signaled staff dissatisfaction at IndiGo. In a move to address its human resources problems IndiGo has decided to reinstate a part of pilots’ salaries that were reduced during the pandemic.

In a communication to the airline staff, Captain Ashim Mitra, Senior Vice President, Flight Operations, IndiGo, said “a further reinstatement of 8% of salaries for all our pilots will be implemented effective 1st August 2022.  This would effectively mean that next month onwards, a total of 16% of the salaries as compared to pre-Covid would be reinstated,” adding that the airline will be reinstating 30 percent of sector pay which means that the sector pay would revert back to the pre-Covid levels from August 1.

The move comes on the backdrop of the number of domestic fliers crossing 300,000 a day and slowly getting back to the pre-COVID levels, an increase in domestic airfares driven largely by the fact that the prices of aviation turbine fuel have risen by over 100 percent since June last year and perhaps most importantly more opportunities opening in the domestic market. Akasa, a new low-cost airline, has been given the nod to start operations while Jet Airways is waiting in the wings to take flight.

SpiceJet, another Delhi-based low-cost airline is in bigger trouble as it received a show-cause notice from the Directorate General of Civil Aviation (DGCA) after a series of its flights have been facing technical problems for about a month or so.
On May 1 about 40 passengers and crew on a flight from Mumbai to Durgapur suffered minor injuries due to a turbulent landing. Two days later an engine failure on a SpiceJet flight did not allow it to take off from Mumbai and, on the same day, a flight returned to Chennai after an engine shutdown. On June 19 a Patna-Delhi flight returned to Patna as the engine caught fire after a bird strike. And, on July 5 a Delhi-Dubai flight had to land in Karachi (Pakistan) after its fuel indicator malfunctioned.

The DGCA show cause states that “poor internal safety oversight and inadequate maintenance actions (as most of the incidents are related to either component failure or system-related failure) has resulted in degradation of the safety margins.”
It adds that the “Financial assessment carried out by DGCA in September 2021 has also revealed that the airline is operating on cash and carry and suppliers/approved vendors are not being paid on regular basis leading to a shortage of spares and frequent invoking of MELs  (or Minimum Equipment List).”

Based on this, the Indian aviation watchdog concluded that SpiceJet “has failed to establish a safe, efficient and reliable air services” under Indian law. The DGCA has called the Accountable Manager of SpiceJet to show cause within three weeks of the July 5 notice as to why action should not be taken against the airline. The circular adds that in case no reply is received within the stipulated period the matter will proceed ex-parte.

Satyendra Pandey, the Managing Partner of Aviation Advisory firm, AT-TV, puts SpiceJet’s problems in perspective when he points out that viewed in isolation most of these incidents can be classified as routine.
However, in view of the financial position of the airline and especially the wording of the DGCA notice,  throws up red flags. A cash and carry basis and lack of spares (both written in the notice)  inevitably mean stress on maintenance teams as they attempt to fly a full schedule,” Pandey says adding that an airline only makes money when the airplanes are in the air and thus aircraft utilization which translates to return on assets is a key consideration.“The notice also indicates issues with safety oversight and inadequate maintenance and would be based on observations,” he says pointing out that maintenance is a cost driver for airlines and thus financial stress inevitably finds its way to operational challenges. “This has been observed time and again the world over,” Pandey adds.

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Former Senior Deputy Editor at Business Line (aka The Hindu Business Line)

1 thought on “Problems at India’s LCCs

  1. Watch Tata digest IndiGo, SpiceJet too. Then they’ll spit out Vistara, after.

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