'We have enough cash flows to finance our operating cost'
'My main job at present is to ensure flights leave and land on time'
'We will see international flights as an extension of our Indian operations and flying to locations two-three hours from India.'
A day after the Marans transferred their SpiceJet shares to Ajay Singh (pictured below) for Rs 400 crore (Rs 4 billion), the new owner talks to Business Standard about his immediate plans for getting the carrier back on track.
Edited excerpts:
Before your entry as an investor, SpiceJet had dues of over Rs 1,200 crore (Rs 12 billion). With about Rs 400 crore (Rs 4 billion) coming in now, and Rs 100 crore (Rs 1 billion) earlier, what is the new position?
We have already cleared Rs 300 crore (Rs 3 billion) of dues.
I had decided to, on priority, clear all statutory dues, including service tax of Rs 40 crore (Rs 400 million) and tax deducted at source of Rs 100 crore (Rs 1 billion).
I wanted to clearly distinguish SpiceJet from Kingfisher Airlines. . .the government was left holding the can in the latter.
The most important task for me is to show our intent of paying everyone, unlike Kingfisher.
We have cleared all dues to our employees.
Our main dues now are with the vendors and lessors.
We are talking to all to make their payments in instalments; and they understand.
Some of them will be paid off from the money we put in.
Is the money you are bringing in an infusion of equity in the company? Your next tranche of Rs 400 crore (Rs 4 billion) will come in March; will all the money (about Rs 1,400 crore or Rs 14 billion) have come by April-end?
The amount of Rs 400 crore has come as a soft loan. We will later decide how much of the money brought by investors will be equity and how much debt; it will be a combination.
We are still getting offers and I also want to keep some shares for employee stock ownership plan.
Will the Marans continue to stay invested?
It is up to them.
They had issued warrants earlier; these will be converted into equity in two tranches -- in April this year and April 2016.
With the conversion, they will have a 20 per cent stake in the non-diluted equity structure.
But since some of the money being brought by investors will be in equity, their stake could be a little lower.
What are your immediate tasks for reviving the airline?
We have enough cash flows to finance our operating cost; there might be a small gap but that will be bridged by March-April.
Our business was affected because of the Directorate General of Civil Aviation’s decision of not allowing forward bookings.
My main job at present is to ensure flights leave and land on time -- customer confidence has to be bought back so that they go for forward booking.
We have had a series of sales to get rid of some inventory; we have done it cleverly.
It is a challenge for an airline that suspends or closes operations, as has happened with SpiceJet, to get back to flying; that rarely happens.
Budget 2015: Complete Coverage
You have lost market share and the airline has made some strategic mistakes in a two-class configuration; that has increased costs. How will you resolve these challenges?
At present, we are running 210 flights, and will have 280 flights in the summer schedule. We will add eight Boeings in the system.
We will fly fewer destinations but have more flights on those routes.
We have already reduced the number of stations we operate from 39 to 31, and will further reduce it.
These mostly are the stations where the Bombardier Q4 flew. We will go back to the older low-cost carrier model that we followed when I was at the helm earlier.
Does it mean you will junk the Bombardiers, which have increased costs for you and not worked?
We will take a call on this in the winter schedule; I do not want to upset the summer schedule.
I am of the view that LCCs should have one-class configuration.
The planes are owned by us but the contracts signed are not in our favour.
We are also talking to Bombardier and they understand.
A final call will be taken soon.
SpiceJet also expanded furiously across destinations, even to China. The strategy was to go global on routes where there might be a first-mover advantage. Will you change that strategy as well?
Yes, we will go back to our old strategy. . . of seeing international flights as an extension of our Indian operations and flying to locations two-three hours from India.
The Delhi-Chennai flight might be extended to Colombo.
We will get back to the same strategy and that will mean some consolidation in the international route strategy.
For instance, I am currently looking at whether or not we should fly Singapore. My feeling is we should not.
There is confusion over whether you will require the Securities and Exchange Board of India's (Sebi's) exemption from making an open offer. What is the reality?
Under the Sebi rules, you get an exemption if you are a sick company that has given a reconstruction and revival plan approved by a competent authority.
In this case, the civil aviation ministry is the competent authority, and it has already given us its go-ahead.
We have informed Sebi.
There is no other requirement for an exemption.
After all, if the company were to close down, shareholders would not have got any value for their shares. . . we are preserving the value.
Also, it is not mandatory for us to go to court with a scheme for reconstruction.
Many have said you were able to clear the deal because of your close links with the Bharatiya Janata Party. You worked closely with the late Pramod Mahajan. . .
I did not go to any BJP politician; they did not know at all.
The only person I went to with a plan was the civil aviation minister, who does not belong to the party.
I also made it a point not to approach any bank in the country for a loan.
A lot of employees had to leave SpiceJet. Will you bring them back?
We have about 3,700 employees, and we require 90 people for every new aircraft.
We have enough numbgers till the summer schedule.
But we will be looking at expansion in the winter schedule and will, obviously, prefer the people who earlier were part of SpiceJet.
Despite its losses, Air India has been selling fares cheap, and that has impacted the industry. Do you see it as a challenge?
Air India is being provided an endless pool of cash, and that is disturbing the market.
The answer is to sell it and let the public own shares. It could have an independent management, if the government is not willing to induct strategic investors in the management team.
Should the government scrap the 5-20 rule that restricts new players from flying international?
It was an illogical rule from the beginning -- you allow foreign airlines to come in but restrict your own from going out.
It has also been one of the key reasons why Indian carriers have not been able to make money and are in losses.
The government has to take a call whether to scrap it or to moderate it and bring in more competition.
When do we see changes in the management and board?
It will happen soon, some of those coming require security clearances.
