DGCA takes multi-pronged action against troubled SpiceJet
06 December 2014
India's Directorate General of Civil Aviation, concerned about the financial and operational performance of the Kalanithi Maran-promoted SpiceJet, on Friday withdrew 186 flight slots of the airline and directed it not to take bookings for flights beyond a month.
After reviewing the financial and operational parameters of the budget carrier, Prabhat Kumar of the DGCA issued a series of instructions to the airline.
SpiceJet was directed to clear dues of about Rs1,600 crore to various vendors and suppliers and to file a ''convincing schedule'' by 15 December.
The regulator also directed the airline not to accept bookings for cancelled flights and refund all affected passengers within a month. ''Till now, they have been accepting bookings for cancelled flights, too. We have instructed them not to do so,'' said a senior DGCA official.
In a statement, Sanjiv Kapoor, the airline's chief operating officer, said, ''SpiceJet today informed the DGCA and the public that for the near-medium term, it intends to operate a fleet of 22 Boeing 737s and 15 Q400s, down from the 37 B737s we operated earlier this year. As a consequence of the fleet reduction of 15 Boeings, unused slots are given back to the airports.''
On future bookings on cancelled flights, he said, ''This has already been stopped as part of standard process.'' He said no future bookings beyond a month would be ''counter-productive'', adding, ''SpiceJet provides refunds of all bookings for cancelled flights made directly with the airline.''
SpiceJet has cut its Boeing 737 fleet to 24 aircraft from 42 at the end of last year. The sharp cut had forced the airline to reduce its daily flights by about a third to 232. As of now, SpiceJet is operating 232 flights a day, compared with 340 a day in September. The airline has pulled out of cities such as Surat and Lucknow.
The DGCA has also directed SpiceJet to provide a report detailing the numbers of passengers affected by flight cancellations, as well as the subsequent refunds, daily. The airline has been asked to provide the first compliance report on Monday.
SpiceJet has said it will operate 22-24 Boeing 737 planes till mid-2015 and not take aircraft on short-term leases, as announced 15 days ago. Earlier in March it had signed a deal with Boeing for 42 Boeing 737 MAX single-aisle planes in a deal worth $4.4 billion. (See: SpiceJet orders 42 Boeing 737 MAX planes in $4.4 bn deal).
''The decision to shrink is part of our restructuring,'' Kapoor told Reuters on Friday. Barely a fortnight earlier, he had said the airline would increase its Boeing 737 fleet to 35 by December-end. The airline was operating 26 of its 28 Boeing planes, he had added.
On the change in plans, Kapoor said. ''Earlier, we had considered short-term leases to get the fleet back to the original size but our latest thinking is to operate a smaller Boeing fleet until at least mid-next year.'' The airline maintains it is scaling down its fleet to control costs and consolidate operations. It is reported to have told the government it expects an investor in six weeks.
It has repeatedly denied lessors are taking back its aircraft. Earlier this week, media reports had said the Airports Authority of India (AAI) had withdrawn credit facilities to the airline and asked it to pay in advance before flying from any of its airports. Kapoor, however, said the AAI had reinstated its credit facility.
''Clarifying once more, as news media continue to report wrongly: SpiceJet is categorically NOT on cash and carry with the AAI,'' Kapoor tweeted on Friday.
On salaries to staff, the DGCA official quoted earlier said, ''We have asked them to pay salaries for November by December 15. From January, they have been asked to make payments within the seventh of each month.''
The DGCA has also constituted a team to place SpiceJet aircraft under ''heightened surveillance'' to ensure safety isn't compromised on account of the carrier's financial troubles. The team will inspect aircraft flown by SpiceJet on a daily basis.
Of late, 115 commanders and 17 co-pilots have resigned from the airline. ''We will keep a strict watch on the airline. We will ensure pilots working with the airline are not made to fly more than the hours specified in the flight-duty limitation norms due to shortage of commanders and co-pilots,'' said another DGCA official.
On Thursday, civil aviation minister Ashok Gajapathi Raju had said, ''We are running through a lot of turbulent weather...not only the public sector, the private sector is also crashing … Kingfisher crashing and now, SpiceJet seems to be giving us heart attacks as far as airlines are concerned.''
For the September quarter, SpiceJet reported a loss of Rs310 crore, its fifth consecutive quarterly loss. For the year-ago period, it had reported a loss of Rs559 crore. In a recent report, the airline's auditors had termed the ability of the airline to operate as a going concern.