InvestorQ : Why has SpiceJet asked its 80 pilots to go on leave without pay?
Juvina Maggie made post

Why has SpiceJet asked its 80 pilots to go on leave without pay?

Deepa Salunkhe answered.
2 weeks ago

On Tuesday, SpiceJet announced that it had placed over 80 pilots on mandatory leave without pay. These were pilots flying the Boeing 737 Max aircraft and the Bombardier aircraft. In the former case, there is still the grounding dispute while in the latter case there is non-availability of spares that is the issue. This pilot leave is expected to be for 2-3 months till the operations stabilize, although that sounds ambiguous. Clearly, the DGCA on Wednesday extended the 50% ban by another one month till 29th October.

SpiceJet has agreed to take back the pilots once the airlines are allowed to fly at full capacity, but that looks like an open-ended promise by the airline. SpiceJet has underlined that this was a temporary measure and it was about cost rationalisation. However, the employees are not willing to believe this story after the experience of Jet Airways and Kingfisher Airlines, even as the markets are sceptical about such promises. While SpiceJet has refused to confirm the number of pilots, it has promised to take them back soon.

The surplus pilots has largely to do with urgent need to rationalize costs after the company reported net losses of Rs789 crore in the June 2022 quarter. The problem of excess pilots has come about due to nearly 50% of the flights of SpiceJet being forcibly grounded by the Directorate General of Civil Aviation (DGCA). On 27th July, DGCA had asked SpiceJet to fly at 50% capacity due to a spate of near accidents. These near mishaps came about due to poor maintenance since most of the bills were pending and the airline was in a crunch.

However, the road may be quite sticky and the DGCA action may end up bankrupting SpiceJet rather than improving their service standards. SpiceJet had double digit market share before this 50% cut, but now it comes way behind Vistara, Air India and Go First. The learning from the Kingfisher and Jet Airways cases is that such flight restrictions can result in long term damage to the financials of the airline company. SpiceJet still has to service its fleet of 60 aircraft which includes the maintenance and the lease rentals.

SpiceJet and its current owner has assured that the MAX aircraft would be back in service soon. However, there is no commitment on time lines. SpiceJet has clarified that the pilots would be off pay during this period, but they would still remain eligible for other employee benefits like insurance benefits and employee leave travel. However, with the ban extended for another 1 month, it is going to get just about tougher for SpiceJet. It has bounced like a phoenix from near bankruptcy multiple times. This time around it may be a lot tougher.