Indian budget carrier SpiceJet is facing turbulence, announcing plans to lay off 1,400 employees – 15 per cent of its workforce – in a desperate bid to reduce costs and appease investors. This move comes amid mounting financial woes, including delayed salaries, mounting debt, and legal challenges.
The airline, citing the need to align ‘companywide costs with operational requirements,’ aims to shave off its Rs 60 crore monthly salary bill. Employees have already started receiving termination notices, adding to the existing hardship of delayed January salaries. Despite assurances of ‘no funding delays’ and ongoing fundraising efforts, SpiceJet’s financial struggles are evident.
Last year, in May, on the occasion of its 18th anniversary, SpiceJet had announced that it would increase the salary of its captains to Rs 7.5 lakhs per month for flying 75 hours. This salary hike was to be effective from May, 2023. Additionally, a tenure-linked monthly loyalty reward programme was also introduced for captains, which can amount to up to a lakh per month, in addition to their regular remuneration.
Trainers and first officers had also seen an increase in their salaries proportionate to the hike given to the captains. In November 2022, SpiceJet had already revised the salaries of its pilots, raising the captains’ salary to Rs 7 lakhs per month for 80 hours of flying.
SpiceJet’s troubles extend beyond internal issues. The Delhi High Court recently ordered the airline to settle outstanding dues of $ 4 million to engine lessors by February 15th. This adds to a string of legal battles with creditors and lessors over unpaid dues, resulting in court reprimands and settlements.
SpiceJet’s troubles are further compounded by a shrinking fleet and intensifying competition. Compared to its 2019 peak of 118 planes and 16,000 employees, it now operates just 30 planes and employs 9,000. This decline coincides with the emergence of new budget carriers such as Akasa Air, further squeezing SpiceJet’s market share.
Despite the challenges, SpiceJet managed to secure over $108 million in January, aligning with its $ 270 million fundraising target. However, the recent court order directing a Rs 50 crore payment to former promoters and another insolvency petition filed by a creditor raise concerns about its long-term viability.
