SpiceJet chief scripts a turnaround
An airline chief executive’s job isn’t easy, especially considering the cut-throat competition, high taxes and the uncertain regulatory environment. Add to that owner and shareholder expectations, and the challenges seem endless.
When 39-year-old Neil Mills took charge of SpiceJet in October 2010, he obviously knew the hurdles ahead. Mills had the right credentials, having worked in low-cost carriers in Europe and Dubai for over a decade. Under him, SpiceJet grew, adding routes. But profits eluded the airline. That is, until now.
Mills led SpiceJet to a profit of Rs 56 crore in the quarter ended June, the first profit after five quarters of loss. Market share rose from 17.1 per cent at the end of March to 18.6 per cent at the end of June. For the quarter ended June, the number of passenger rose 26 per cent, while revenue rose 51 per cent year-on-year.
According to HSBC Global Research, SpiceJet’s results were better than expected, owing to higher other income and lower-than-estimated costs. Some, however, attribute the turnaround to Kingfisher Airlines’ woes and the strike at Air India.
Before moving to SpiceJet, Mills spent 12 years in various management roles in EasyJet, one of the largest European low-cost airlines, and a year and half as chief financial officer in FlyDubai.
Mills brought to SpiceJet an approach that stresses on attention to detail. He also introduced measures to improve efficiency and minimise costs. “He has an eye for detail and data. At meetings, he invariably comes up with points that we overlooked,” said a SpiceJet executive. “He is focused on the bottom line all the time,” said another airline executive.
“Neil has performed well, considering the severe operating environment. After his entry, Neil and his team started a strategic review to turn around the airline and structure a new business plan, including urgently addressing the long-term fleet requirements of SpiceJet that were neglected by the previous ownership. I must admit SpiceJet didn’t have a serious business plan before Neil took charge,” said Kapil Kaul of the Centre for Asia-Pacific Aviation.
“However, a sustainable turnaround would take time, as the industry is faced with a very negative and hostile fiscal regime. This, coupled with a very ineffective policy and regulatory framework, makes his task extremely challenging. I will prefer to wait for consistent delivery of any turnaround before reaching any conclusion, but his efforts are showing results,” he added.
SpiceJet’s aircraft utilisation has risen to 12.5 hours daily. Company sources claim this is the highest among all domestic airlines.
The airline has also been able to cut costs, deciding to carry out maintenance checks at GMR’s facility for maintenance, repair and overhaul at Hyderabad, instead of sending the aircraft abroad. Upgrade of passenger reservation software (which reduces cost of ticket sales) and replacing older aircraft with new ones have also reduced costs.
Mills doesn’t prefer the words ‘cost cutting’, as he believes these have a negative connotation. “It is about bringing efficiency,” he says, adding, “The operating environment has been difficult. We were impacted due to competition selling below costs and heightened fuel costs.”
Under Mills, SpiceJet has also stepped into uncharted territory. For instance, importing aviation turbine fuel directly or deciding to fly to Kabul. The decision to fly to Kabul is, however, a gamble, as the Afghan capital is neither a market for leisure, nor one of corporate travel. In the domestic sector, too, SpiceJet has been forced to withdraw certain flights and shut stations like Nanded in Maharashtra because of poor traffic.
Mills, however, seems confident about the Kabul sector. The route would benefit Afghan traders and enable medical tourists from that country to visit India. “Instead of flying to the Gulf, they can fly to Delhi, which is closer,” he says.
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