SpiceJet places 80 pilots on a 3 month leave without pay.
In a rather sudden and surprising move that unnerved markets, the heavily indebted budget airline, SpiceJet, summarily placed over 80 pilots on mandatory leave without pay. This leave is expected to be for 2-3 months till the operations stabilize and the airline was allowed to fly at its normal capacity. SpiceJet has been quick to clarify that this is a temporary measure and it is more about cost rationalisation and balancing the cost of pilots with the number of flights they are permitted to fly. However, after the experience of Jet Airways and Kingfisher Airlines, the markets are very sceptical about the whole issue.
The airline company has been quick to clarify that its existing operations would not be impacted in any way. Most of the pilots who have been grounded without pay are those navigating the Boeing 737 fleet and Bombardier Q400 fleet. For now, they have been put on leave without pay for a period of 3 months, although their fate is not too clear after that. SpiceJet has underlined that the 80 plus pilots would be taken back as soon as the airline begins induction of Boeing 737 MAX aircraft into its fleet. However, such announcements by an airline company have rarely had a happy ending and problems just tend to snowball.
How did the airline end up with surplus pilots such that they had to temporarily send them on leave without pay to rationalize costs. Obviously, the excess pilots syndrome has come about due to nearly 50% of the flights of SpiceJet being forcibly grounded by the Directorate General of Civil Aviation (DGCA), which had instructed SpiceJet to fly at just 50% of its existing capacity. This was after the airline passengers had to endure several near misses and near accidents due to lack of maintenance, limited staff etc. DGCA has asked SpiceJet to fly at half capacity till the time it exhibits ability to run the airline smoothly.
SpiceJet has clarified that these pilots were not being retrenched, although the airline refused to confirm the exact number of pilots who had been placed on leave without pay. The sole aim was to rationalize the costs and match it with the revenue flows in a more sustainable manner till the time it is able to fly at full capacity. SpiceJet had double digit market share before this 50% cut, but now it comes way behind Vistara, Air India and even Go First. Like we saw in the case of Kingfisher and Jet Airways, many a times, such flight restrictions can result in long term damage to the financials of the airline company.
SpiceJet currently has a fleet of 60 plus aircraft. However, the reason for asking the Bombardier pilots to go on leave is that most of the Bombardier aircraft are grounded for want of spares. The company also had to take a hit after the Boeing 737 Max had to be grounded under pressure from the DGCA. However, the chairman has clarified that the ongoing planned pilot induction program would continue as usual hoping that the aircraft would be back in service soon. Max flights have been grounded for too long creating a literal redundancy of Max 737 pilots and they have been the worse affected in this phase.
The founder of SpiceJet and the current owner has assured that the MAX aircraft would be back in service soon and the pilots would be recalled once the induction begins. However, the airline has been reticent about the time lines. SpiceJet has also clarified that while the pilots would be off pay during this period, they would still remain eligible for all other employee benefits including insurance benefits and employee leave travel. With a massive Rs789 crore net loss in Q1FY23, it may be an uphill task for SpiceJet to bounce back.
The DGCA ban on SpiceJet was imposed on 27th July for a period of 8 weeks, so it should be in effect till the end of September. However, it remains to be seen if the DGCA lifts the ban of chooses to continue the ban for more time. That could put SpiceJet under a lot of financial pressure. This could really be the litmus test for SpiceJet.
Start Investing in 5 mins*
Rs. 20 Flat Per Order | 0% Brokerage
About the Author
DisclaimerInvestment/Trading in securities Market is subject to market risk, past performance is not a guarantee of future performance. The risk of loss in trading and investment in Securities markets including Equites and Derivatives can be substantial.
Open Free Demat Account
By proceeding, you agree to the T&C.
Fill in your details below: