What went wrong for SpiceJet at a time when it was headed to recovery & will it survive?


By Binoy Prabhakar, ET Bureau | 4 Jan, 2015 


Not long ago, SpiceJet exuded a culture of exuberance and flamboyance synonymous with successful low-cost airlines around the globe. Its cabin crew celebrated Holi in March by dancing on board. The airline introduced 'weekend uniforms' for employees— colourful tops paired with jeans — and played rock songs on flights.


What a difference a few months make. On Christmas, flight crews that broke into a jingle or sported Santa caps to welcome passengers did not belong to SpiceJet. In the two months leading to the New Year, the airline had cancelled more than 2,000 flights. It delayed salaries in December — a dubious first in its nine-year history. 'Jingle Bells, Jingle Bells' was the last thing on the minds of employees.



Even by the unpredictable standards of aviation, SpiceJet has had a nasty ride in recent months. As recent as August, the airline seemed headed towards an improbable turnaround. Buoyed by recurring sales, SpiceJet rapidly increased market share and topped passenger loads. Losses fell by nearly half in the September quarter from a year ago. Now, it is struggling to stay aloft, saved only by a last-minute intervention by the aviation ministry. Since July, when SpiceJet climbed to No. 2 in terms of the number of passengers carried by an airline, the stock has tumbled 8%, losing nearly Rs 100 crore in market capitalisation.


How did things come to such a pass? In January 2013, SpiceJet made a fresh start at turning around operations. The strategy was built on a cocktail of frequent sales, efficient network and improved services, but it faced an impediment from the word go — escalating losses. As it happened, in May, it posted a record loss of Rs 1,003 crore for the year ended March.


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