This is an audio transcript of The Morning Brief podcast episode: Plane In A Pickle: SpiceJet's Many Problems

BG Sound 0:01  

This is the morning brief from the economic times there was a corporate fire in the windshield and IQ 400 aircraft basically landed the pilot was mentally fatigued, he did not want to operate further the management called him up and threatened him that if he does not operate after this incident he will be fired religiously deducted the PF from my salary, but it has not been credited in my EPF account

BG Sound 0:33  

so I sent them a legal notice they did not reply to it

Aman Chehel's colleague 0:37  

space for the aircraft have stopped coming in and pay for new space

BG Sound 0:41  

this practice is very common with financially weak airlines I shared also has been trying to source spares of the gray market, this is the worst thing you can possibly do to your aircraft. You know, while the perception was oh, everything's fine and dandy. With adjusting now at the helm. It was just nothing but highly elaborate window dressing scheme that's widely believed that this is the end of the rope for SpiceJet

Anirban Chowdhury 1:12  

SpiceJet I just think airline which cleverly names its aircraft after Indian spices, coriander, turmeric, chili, redchilly. Even Caraway and shahi jeera has now landed itself in a pickle. Frequent safety incidents a show cause notice and probed by the aviation regulator delays in tax payments, default notices and court cases from financiers, worried lenders and very angry employees. But then SpiceJet has stood on the edge of a precipice before and from there. It has taken flight. What will it do this time? How will Ajay Singh keep his airline flying? Listen on. It's the 22nd of July from the economic times. I'm Anirban Chowdhury and you're listening to clean in a pickle SpiceJet's many problems on the morning brief.

Anirban Chowdhury 2:22  

In response to queries SpiceJet denied all the assessments made by the host, consultant and lawyer and the allegations from its employees. For this episode, I spoke to a bunch of people whom you heard at the beginning.

Aman Chehel 2:38  

My name is Captain Aman Chahal. I was working with SpiceJet for over a decade. 

BG Sound 2:43  

I am an ex captain for Spice Jet. I flew for the airline for around a decade. I worked at SpiceJet for about five and a half years

Ajay Kumar 2:52  

I am Ajay Kumar I'm the managing partner of this law firm KLA legal I represent at least five less source who have lives in relationship with Spice Jet

Mark Martin 3:02  

 My name is Mark D Martin, I'm the CEO of Martin consulting are the pleasure working in SpiceJet as head of operations planning and strategy that probably be called a SpiceJet alumina.

Anirban Chowdhury 3:19  

To understand SpiceJet is to know that it has always been somewhat of a survivor since its earliest days as Modiluft a joint venture air taxi service between the SK Modi group and Lufthansa in the 90s. The airline has changed hands 4 times Ajay Singh and UK based NRI Bhulo Kansagra in 2004, American investor Wilbur Ross in 2008. Media Baron Kalanithi Maran in 2010. And Ajay Singh again in 2015, at least twice, it has faced major financial crisis. In fact, it was teetering on the brink of a shutdown in 2015. Before Singh came in as a white knight to save it. More than half a dozen investors, including indeed the Tata Group, bought into and exited the airline the last two decades

Mark Martin 4:14  

SpiceJet by is dnn origin and lineage has predominantly been a company that's been driven by multiple promoters who wanted to take it in multiple directions.

Anirban Chowdhury 4:27  

That's Mark Martin. So Ajay Singh, bought SpiceJet from the Marans for just two rupees in 2015, taking on its debt troubles, and the wrath of the earlier owners Singh found the airline a wreck and turned it around by reworking contracts and agreements and drawing up what seemed like a very clever revival plan. All this even as he fought cases filed by the Marans who perhaps rightly thought that they had got a raw deal

Mark Martin 5:00  

When Ajay returned to the first thing he did was he restored quite a bit of market confidence in SpiceJet. So him being the original promoter with Bhupendra, Kansagara or as we all know him as Bhulo Kansagara Pierre Ajay coming back, reassured quite a bit that okay, he's now in charge and he's going to it's not good with long run like the same way it was before. That's Spice Jet is now you know back in the hands of the promoter

Anirban Chowdhury 5:30  

and the promoter delivered SpiceJet soon began to report profits

BG Sound 5:35  

and your third largest domestic airline carrier SpiceJet reported a profit of rupees 105.3 crore for the quarter ended September 30 2017. Up 79% from rupees 58.9 crore in the same quarter last fiscal,

Anirban Chowdhury 5:50  

the airline announced big expansion plans 

BG Sound 5:54  

SpiceJet also rose by over 4%. Today after the company announced a deal worth 150,000 crore at Boeing to purchase over 200 new aircraft

Anirban Chowdhury 6:04  

 and Singh sounded very confident indeed,

Ajay Singh 6:07  

we feel that we are in a position where we should now that we have consolidated that we should look for growth. And not that we haven't grown in the last two years we've nearly doubled our capacity in the last two years.

Anirban Chowdhury 6:22  

Around the same time, rival carrier Jet Airways went bankrupt and SpiceJet rapidly took over a bunch of its leased planes. Some literally overnight. The usual regulatory process for such a change of leases takes months, but not for SpiceJet.

Mark Martin 6:38  

We must credit it the government of India also did its utmost best to support SpiceJet also, I mean, never in the history has. The Indian government really stuck his neck out for any airline including Air India or India Airlines, but this time, the ministry actually got up backed helped SpiceJet

Anirban Chowdhury 6:59  

so far, so good. But after 2019 Things started falling apart. The COVID 19 pandemic happened battering airline businesses across the world. Like its peers in the industry. SpiceJet grounded planes shrank its operations and plead. Its annual losses trebled between 2019 and 2021. But also, the old rot in the woodwork started showing the window dressing was exposed SpiceJet started defaulting on payments to lenders and vendors. And they showed up angry from Credit Suisse to Canara bank from planemaker de Havilland to plane less or go shock from the creditor to the caterer. Everyone started taking the airline to court

BG Sound 7:51  

buddy to another the Madras High Court today as a large Credit Suisse winding up petition against SpiceJet for defaulting on $24 million dollars.

Anirban Chowdhury 7:58  

Internally, employees raged at being paid lower salaries.

BG Sound 8:04  

Approximately 150 staff members of SpiceJet struck work today tele airport complaining of non payment of dues,

Anirban Chowdhury 8:12  

depleting cash reserves, angry suppliers, irate employees, the perfect turbulence. Naturally, it showed in the operations too in 18 days till the first week of July this year. Eight of SpiceJet flights faced snags the authorities took stern notice 

BG Sound 8:34  

the aviation regulator DGCA has issued to show cause notice to SpiceJet.

BG Sound 8:38  

The review as far as internal Safety and Oversight is concerned, it shows major lapses

BG Sound 8:44  

is SpiceJet safe to fly on

Anirban Chowdhury 8:47  

 That's a good question. I asked Mark who knows aircraft safety manuals like the back of his hand to explain, he said the main problem

Mark Martin 8:56  

has to do with operating aircraft and pushing that aircraft or pushing your fleet to the point that it breaks.

Anirban Chowdhury 9:07  

Mark explained to terms to me, a minimum equipment list or Emile and deferred defects. Both basically imply the same thing. Flying an aircraft with some of its equipment in operable. Basically, not grounding it completely when a part goes faulty, and giving it a grace period of flight before the airline rectifies or changes that part for example, if a weather radar on your aircraft malfunctions at a time when you're not flying in bad weather, you still fly the aircraft right because you don't need the weather radar that much. So the aircraft is not grounded. The problem with SpiceJet is that it uses these allowance to the extreme limits.

Mark Martin 9:59  

Usually when aircraft goes into mel typical industry standard is to get that aircraft back flying in four to five days when you get the part change, change the part in flight. But what happens in you know, in airlines very similar to SpiceJet and SpiceJet, per se is where you take advantage of that allowance of deferred defects, which is 10 days or let's say 50 flights or 100 hours or whatever it is. And you maximum flight to the point that you can't get any more extensions from that aircraft. Now this is this practice is very common with you know, financially weak airlines where you have an issue with access to spares to credit lines, to getting apart literally overnight to making remittences for that part overnight. These more or less, I mean, the root cause of them not being able to get parts today, they're not being able to get getting past this cash and carry use where there is no credit, you got to pay for cash, literally pay for cash and take your part,

Anirban Chowdhury 11:07  

The Spice Jet pilots, I spoke to concurred. In fact, they said it gets worse. The voices of two of three pilots that you hear in this episode have been altered on their request to protect their identity,

Spice jet Pilot 11:22  

spares for the aircraft have stopped coming in. So now in order to get spares for the other aircraft, you have to start taking it from other aircraft. So, they used to earmark some aircraft, put it on the ground aircraft on ground, and whenever the parts of some aircraft used to be boe unserviceable, they used to cannibalize from that aircraft it is allowed, but it is allowed only to certain extremes. 

Spice jet Pilot 11:51  

If these things are happening again and again, then you start to wonder that is there something which is going really wrong with the maintenance section? Are they not doing things the way they should be doing? are they cutting corners? So all these things come to a pilot's mind and that is when they actually start questioning the maintenance team and tell them that okay, if this glitche is happening again and again, I will not accept the aircraft. So the pilots who refuse to accept such flights are off rostered. They're not given any flights 

Anirban Chowdhury 12:23  

This is what Mark told me

Mark Martin 12:26  

what also is a very very interesting and worthwhile to note over here is the whole part of buying spares also of the gray market it's it's it's absolutely appaulling that there is you'll be surprised Anirban they are WhatsApp groups with brokers across the world where you put in a requirement for a particular part we put the part number you put what you need description. And guess what summary from someplace and Tajikistan or Kyrgyzstan or Africa or, I mean would show up and say hey, I got a part for you. That's what the part costs and the part are there is no history or traceability in terms of its records or in terms of its maintenance and so on any test or lab tests which are done and we have seen and this is through a few sources, that SpiceJet also has been trying to source embareck Q 400 parts through this channel. And that just kind of raises several red flags for me and everybody else was out there as an aviation or safety expert. This is the worst thing you can possibly do to your aircraft. 

Anirban Chowdhury 13:43  

SpiceJet said it has never approached the secondary market for spares. It said the DGCA has never made any observations on me l and that is aircraft are absolutely fit to fly. So why does SpiceJet sweat its aircraft so much? Because it has to some of its planes are grounded. Why? Well because it is not paying rentals to lessors in time.

Ajay Kumar 14:09  

Jet lessors have been facing various problems such as non receipt of lease rental payments.

Anirban Chowdhury 14:16  

That's Ajay the lawyer you heard at the beginning of this episode.

Ajay Kumar 14:20  

Apart from the lease rental payment lessees are also required to pay a regular maintenance reserve to the lessor. And you know, lessors have not been receiving those payments. Also, when an aircraft is leased by a lessor to the lessee. lessee usually usually deposits a security deposit with them. You know as a safety net or lessee can also place a letter of credit. Many less hours because of non receipt of lease rental payment on time, utilized those security deposit and letters of credit and the lessee is struggling to replenish those letters of credit and security deposit. So the problems I would say is manifold.

Anirban Chowdhury 15:10  

Ajay tells me that SpiceJet has received various default notices from lessors.

Ajay Kumar 15:15  

One particular lessor has recently issued a default notice. Others may have also issued them a default notice, but from time to time, what SpiceJet does is that try to cure those defaults or they come up with a payment plan that we will pay you this much amount within this period of time.

Anirban Chowdhury 15:34  

But how long will this continue? Because the next stage is a request to the DGCA to deregister those aircraft and have them grounded.

Ajay Kumar 15:44  

I think unless they come up with a plan to pay and you know, they are able to manage funds from somewhere, I would not rule out any such possibility. So that's the risk that SpiceJet is running at the moment,

Anirban Chowdhury 15:57  

the airline said the information on lessors is wrong and strongly denied. Meanwhile, SpiceJet continues to lease more aircraft, in fact, whateleys them, which means taking on the planes and their crew. But Mark isn't impressed.

Mark Martin 16:16  

It's a thumb rule. They say in aviation, if airline has got the worst credibility in the market, and he doesn't have the ability or the wherewithal to own an aircraft or, or dry lease an aircraft which requires quite a bit of trust. The only thing left for you for you to do is go over to hole on the wall outfits and small companies in Dubai and Slovakia and East Europe and you know Africa and Georgia and these other places and get hold of an aircraft on a wet lease agreement.

Anirban Chowdhury 16:46  

And while the airline hasn't been paying its taxes in time to ET check the provident fund accounts of some pilots. The airline hasn't made payments to those accounts after July 2021. It didn't submit PFs for September to December 2020 either. We've also seen the screenshot of a whatsapp chat from their chief pilot, which shows the airline hasn't given its pilot that tax declaration document or form 16 yet.

Mark Martin 17:18  

So what we know here is that spy should hasn't paid its PF for the deductions they've done on employees. They've not paid TDs they've not paid the GST, and I think GST was known to us in 2021 itself. I remember I think it was your it was your newspaper that wrote a story about GST default and how the GST Council sent them several notices. Then there's been quite a lot of lapses on withholding tax where TDs was never was never paid or submitted into the TDS accounts. So in that case, those who filed their tax returns couldn't claim the TDS because it never showed up. 

Anirban Chowdhury 18:01  

SpiceJet said there have been deferrals in payments, but no defaults. It added it has paid GST till February 2022 And that form 16 will be given to employees well within the filing date of income tax returns. Making the mix a darker shade of red is the wrath of the employees over salaries. The DGCS concerns are twofold, impoverished aircraft and underpaid employees can make for a very unsafe flight. Here's what Arman Chehel SpiceJet pilot who was ready to be identified and his two colleagues told us

Aman Chehel 18:39  

since the lockdown happened March 21 22nd of 2020 immediately that month, then the salaries got deferred straightaway. 

Aman Chehel's colleague 18:49  

They started by deducting almost half the salary in March 2020. And then the cumulative salary deduction was almost 70 to 80%.

Aman Chehel 18:59  

So because flying was very less most of the pilots were sitting at home for three four months without any salary 

Aman Chehel's Collegue 19:06  

zero salary was received by all of us, but they religiously deducted my income tax and they religiously deleted pilot Benevolent Fund which is an in house arrangement of SpiceJet 500 rupees per month from all the pilots collected so that it is given when pilots need the money but they never released that Benevolent fund money. All the higher management pilots and people and HR and management they take home pay was more than one group and here the first officers my take home pay in the year 2020 to one financial year and the second consecutive year. My take home pay was just 6.5 and seven lakhs.

Anirban Chowdhury 19:51  

That was during the two years of the pandemic. Now, flights are getting back to pre COVID levels, but the pilots say the salaries situation has not improved.

Aman Chehel 20:03  

Now 2022 The Flying has become normal. Everybody is doing 50 to 60 hours and some people have already done 100 hours, people are only getting 30 to 40% of their salary, depending upon how much they are flying.

Anirban Chowdhury 20:18  

Pilots say, just like they are threatened when they flag flight incidents, their protests on salary issues are also clamped down.

Aman Chehel 20:28  

There was a meeting, which happened in Mumbai and Bangalore in February, where pilots were given a chance to speak up and give all the problems and all the problems also, after that meeting, suddenly, after a couple of months, two of the pilots one or trainer and other an online, very senior ex management guy, they were just chucked out because of that meeting because they were trying to raise a voice and to set an example to other pilots. These two pilots were big, and they were chucked out without giving any reason.

Anirban Chowdhury 21:03  

spicejet denied all allegations from employees, except that it had reduced salaries during COVID-19. It added and it hasn't retrenched a single employee and that it is raising salaries now.

Aman Chehel's Collegue 21:17  

I filed a legal notice against the company on the ninth of February, they did not reply to it. I sent it again and again. There was no reply from anyone from SpiceJet. And now I'm filing a case against them in the court.

Anirban Chowdhury 21:30  

But who's to say what the outcome will be. The pilots themselves are unsure whether they'll get their pending salaries, and they are usually at the top salary brackets. Then there are the engineers, the technicians, the ground staff. To be sure, SpiceJet isn't the only airline facing employee angst. Neither are its employees, the only ones that are underpaid. Pilots, engineers and technicians at rival carriers Indigo and go first recently stayed away from work protesting salary issues. Also, to be fair, SpiceJet flights aren't the only ones to face mid air snacks. In fact, the incidents have opened up a Pandora's box. The DGCA made recent surprise checks at other airlines and found similar lapses of spares and equipment. The regulator has also asked airlines to deploy engineers who are better qualified to certify landing aircraft. But SpiceJet as we've seen in this episode, has a few extra problems and it has a few different ways of dealing with them.

Mark Martin 22:44  

There's a tremendous amount of goodwill spy shed has been closed doors and with with with larger associations and groups and so on, let's Spice Jet naturally get some level of fedge. I mean, imagine if all these violations Anirban PF TDs GST were not paid by, let's say an indigo or GoAir. I mean, we'd probably have seen how we probably had probably seen drains on them long ago and the Ellenwood have pretty much been shut down. But in spacious case has been more than a year or so. And it's been a very suttle passive excuse me, you need to pay us some money but as opposed to a more vociferous full blown fully charged up rate. So spy ship does does enjoy a tremendous amount of goodwill and this is and this is why I say that, from all of this SpiceJet will survive.

Anirban Chowdhury 23:44  

The airlines certainly has flown itself into a perfect storm. banks that have so far put off accounting for its debt as non performing assets may not do so forever. lessors that have been patient with it and wary of losing a customer may now ask for their aircraft back. The tax departments will keep going after it. The regulator will hopefully continue to tighten its screws. Angry employees will file more cases and more and more creditors will appeal for it to wind up. SpiceJet has weathered turbulence before but this time, it seems to be coming at it from many sites. The airline needs a plan that will help you to solve its problems not to skirt them. And for that it needs money. Where will that money come from? Another new investor will SpiceJet change hands yet again. Let's wait and watch. 

You've been listening to playing in a pickle SpiceJet's many problems on the morning brief. This episode was produced by my colleague Bhavya Dilipkumar and Sumit Pande from ET and Swati Joshi from Aawaz. Sound Editors Rajas Naik Indranil Battacharjee from et and Saundarya Jayachandran from Aawaz. Additional research Pari Desai from et do like and share the episode. Tune in to et play our latest platform for all audio content, including your favorite podcast The Morning Brief. The morning brief airs every Tuesday, Thursday and Friday. Thank you and fly say all clips used in this episode belong to their respective owners. Credits are given in the description

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