SpiceJet Case Study: How SpiceJet avoided being another Kingfisher Airlines

Spicejet Case Study

1SpiceJet Case Study

SpiceJet, a leading Indian aviation player, was on the verge of shutting shop few years back (2014). With delaying salaries, layoffs, delay in payment of statuary dues – Service Tax, TDS etc- in 2014, SpiceJet was struggling to survive. Here, in the SpiceJet Case Study, we discuss how the the airline ended up becoming the world’s best airline stock in 2017 from the turmoil.

2The Curious Case of SpiceJet – Issues and Problems

  1. Chennai based Sun Group acquired SpiceJet in 2010. The inconsistent profits were set off with investments by media baron Kalanithi Maran. Maran invested close to Rs 1500 cr in the airine and ended up owning 58% shares.
  2. The losses in the airline were still overlooked in a hope to loop in an overseas investor.
  3. SpiceJet was in talks with American private equity investors who could bail the airline out from immense losses. PE investors like TPG Capital, Indigo Partners etc- were keen to invest in the airline. However, when the deal was about to take shape, Dayanithi Maran, brother of the majority stakeholder Kalanithi Maran, was accused of misconduct by the CBI in the famous Aircel-Maxis case. The PE firms therefore backed out from SpiceJet investment.
  4. With no investors and burgeoning losses, SpiceJet was forced to return planes, cut man power and consequently cancelling flights. This made the airline to default on fuel payments, clearing vendors outstanding and other debt. SpiceJet defaults on salary payment a second timeSpiceJet asks 50 captains in its flight crew to leave in a month.
  5. DGCA came into action and prevented booking of tickets from more than 30 days and ensured immediate refund to passengers whose flights were cancelled.
  6. Cash inflows declined, travel agents, who used to deposit advances for bookings and then took refunds, now said no to deposits and on December 15, 2014, the SpiceJet management told the DGCA it was about to suspend operations.

3The Curious Case of SpiceJet – Action and Turnaround

  1. Kalanithi Maran sold its stake in the airline and a new management led by Ajay Singh came into force. Under the leadership of Ajay Singh, the airline proposed a new turnaround plan to Ministry of Aviation.
  2. The government had a vital role in bringing SpiceJet back to life. Aviation ministry wrote to AAI and oil companies asking them to allow credit facilities to SpiceJet and also allow the airline to stagger payments to clear its dues. Also, DGCA was asked to lift the 30 day ban on sale of tickets placed on the airline.
  3. Simultaneously, Singh himself met the oil companies to resume working with SpiceJet on part payment of their dues. The falling oil prices also helped.
  4. Singh identified that their problems were multiplying was because of ‘loss of trust’. The airline was paying a price of loss of trust amongst it customers, employees, vendors etc-. He identified that the only way to win the trust back was by resuming normal operations back. Therefore, Singh on getting the basics of the airline right – ensure that flights are taking off in time and interfaces like websites, counters at airport are working smoothly. SpiceJet strategically chose the holiday period to rollout the measures so that most of the customers can benefit and gain trust back again in the airline.
  5. SpiceJet also shut down five domestic and 3 international destinations to optimise their cost.
  6. Though sale offers continued, but the key dates – holidays, festivals etc- were kept outside the purview of the sale. Earlier, the offers were applicable across all dates hitting the revenues.

4SpiceJet in 2017 – Flying High

  1. SpiceJet case study tells us what an positive attitude and the right strategic moves can do. Today, the airline’s shares are hovering around Rs 125 each. In June, Bloomberg said it was the world’s best aviation stock this year with a 124% gain.
  2. SpiceJet is valued at Rs 7,400 crore, up from the Rs 650 crore it was valued at during its darkest hour in 2014. Rival Jet Airways Ltd, with a fleet double that of SpiceJet, is valued at Rs6,200 crore.
  3. Earlier this year, the airline ordered 100 fuel-efficient Boeing Max aircraft, adding to a previous order of 55 planes which will be delivered over the next decade and bring down its costs by another 5-10%.  It also has options to buy 50 more planes taking its order book to 205.

The SpiceJet Case Study is amongst the rarest instances where an airline has revived back from near closure levels. Prior to SpiceJet, players like Kingfisher Airline and Paramount Airways and Indus Airlines have already shut shops.

Disadvantages of GST Implementation in India

The Indian parliament gave a unanimous decision on implementation of GST (Goods & Services Tax) in India from the coming financial year FY 17-18. Undoubtedly this move is historic in the history of Indian Economy. The passing of the GST bill is being seen the next big move after the 90s reforms of the Indian Economy. The government’s is already gearing up for timely implementation of the GST by strengthening the IT backbone which shall propel the decision ahead.

But at the same time there are few aspects with contradict the growth story and might be seen as hurdles which will take time to overcome post the implementation of GST. On one hand where a majority of corporate world is rejoicing, there are few who do not belong the happy lot.

  1. When the aviation industry was witnessing the much awaited growth with increasing domestic traffic, the GST implementation might slower the rate at which the industry is expecting growth as flying will become expensive. Service tax on fares currently range between 6% and 9% (depending on the class of travel). With GST, the rate will surpass 15%, if not 18%, effectively doubling the tax rate.

  2. India, on one hand, has the lowest insurance penetration in the world (less than 5% of Indian population & half of the global average) and on the other GST will further make the insurance products dearer. Life, health & motor insurances will begin to cost more from April 2017 as taxes will go up by up to 300 basis points.
  3. IT companies have adopted a strategy of spreading their operations and stationing their majority workforce where the cost of operations in low (e.g. Chennai, Bangalore). The GST may lead to increasing costs of operations at their most cost-effective delivery centers.

  4. The Banking & Financial Sector (including Insurance as stated above) might take a hit as ccurrently the effective tax rate in the sector is 14 per cent, which is levied only on fee component (and not interest) of the transaction. Under GST, effective tax rate on fee-based transactions is expected to increase to 18-20%. With the implementation of GST a moderate increase in the cost of financial services such as loan processing fees, debit/credit card charges, insurance premiums, etc. is expected.

  5. Petroleum products form a majority import value in the Indian ecosystem. However, key petroleum products like crude, natural gas, high-speed diesel and ATF have been kept out of GST. Compliance costs are likely to rise because of dual indirect tax mechanism.

A seemless implementation of GST may boost growth of the overall economy to a level that the above stated pitfalls might be merely seem as part and parcel of the India growth story. E.g. When most of the sectors grow simultaneously, it might increase jobs and disposable income of individuals to an extent that the dearness brought by GST gets offset.

Analysts are already predicting 10% GDP growth for the Indian Economy with GST coming into effect. All eyes will be focussed on Q1 earnings of FY 2017-18 once the GST comes into effect and the companies start disclosing their numbers.

GD Topic : Should Indian Government Implement GST (Goods & Services Tax) ?

Background of GST (Goods and Services Tax)

GST has been proposed in the Indian Parliament few months back and economists are deep diving to study its implications and feasibility of implementation throughout the country. Implementation of GST has been passed by one house of the Indian parliament but awaits approval from the other house.The Idea of GST was introduced long back but due to lot of issues in implementation the government is trying hard to amend the constitution and take it though.


Read More on Drawbacks of GST Implementation in IndiaClick Here


What is GST?

GST stands for Good and Services tax. At present, India has two broad categories of taxes:-

  1. Direct Taxes (eg. Income tax, Wealth tax) – The liability of these taxes cannot be shifted.
  2. Indirect Taxes – Liability can be shifted.
    • Central VAT
    • State VAT
    • Service Tax

The bottom line of GST is to curb the payment of ‘tax on tax’ i.e. double taxation.

If GST is implemented, consumers shall pay taxes only on the ‘new’ value added just like the VAT.


Read More on Drawbacks of GST Implementation in IndiaClick Here


Under the current tax structure, state government only levy taxes on goods while central government levies taxes on both goods and services. In new emerging industries, such as ecommerce, it is difficult to distinguish between products and services. Thereby, GST will help unifying taxation throughout the country.

Indian GST will have following distribution:

  1. Central GST
  2. State GST
  3. Integrated GST (This is a special tax that one has to pay for interstate transaction which is 1% which is to be decided by GST council after 5 years if they wish to continue or abandon it)

Why should government implement GST – Benefits of GST

  1. GST will bring tax consistency throughout the country.
  2. It will allow free movement of goods from one state to another.
  3. The cost of product from across states will almost be the same thereby providing equal opportunities of business owners in all states.
  4. The cost of the product for the manufacturers will come down as double taxation will be minimised.
  5. A reduction in these cascading taxes increases the incentive for more consumption, leading to higher revenues which compensate for the reduction in tax rates.
  6. With consumers having more money in their pockets, the GDP is set to increase.

Why should government NOT implement GST – Disadvantages of GST

  1. From a consumer standpoint, there is no worthy disadvantage of implementing GST. However, few businesses may suffer.
  2. Businesses where cost advantages lies within states will suffer and lose their core competency. e.g. VAT in Bangalore, Chennai and Hyderabad are lowest at 5% and it helps firms to provide products all across India at price which other states cannot meet due to higher VAT rates in other states. This is the reason why all eCommerce firms have their biggest fulfillment centers in these three cities.
    States will suffer huge loss with implementation of GST as they will lose price advantage for common commodities available nationwide. Government has reached to conclusion they would still be paying any revenue loss hereafter to each state for a period of 5 years from the date of implementation of GST.
  3. The biggest contradiction comes with the fact that, on one hand, the government is pushing Digital India movement and boosting eCommerce, whereas on the other with GST its making tough for businesses to operate at a nationwide scale.
    Recently eCommerce companies have requested government to keep aggregators out of GST.


Read More on Drawbacks of GST Implementation in India – Click Here

GDPI Resources : Order of Reading Jeffrey Archer Books

With the placement season kicking off in most of the B-Schools in the country, reading is one of the best hobbies you can talk about in an interview. No matter its a campus interview to hire freshers or lateral interview for experiences folks, reading as a hobby is one of the best you can flaunt.But if you are thinking that you a sorted just by mentioning ‘Reading’ as a hobby in your resume without even flipping a page, you are wrong. You might get lucky if the interviewer himself is not fond of books. At the same time, chances are that he will not talk about your hobby (i.e. Reading) if he himself is not very much into it so you might not even get a chance to fool around. However, if the interviewer is a voracious reader himself (a majority of HR folks read more than average), you will find yourself in a soup by mentioning reading as your hobby just for the sake of it.So its important to actually read at least a couple of titles so that you may talk about its nuances. Non fiction might be tough for people who are starting to build reading as a habit until you are really interested in the true story. A better way can be to start with fiction and pick some titles of the master story teller – Jeffrey Archer.Jeffrey Archer books are amongst the best when it comes to English fiction. Though a bit fat, the books never let you go even when you have kept it down. However, Jeffrey Archer has been writing both standalone and series of tales and you must know which one to pick before you pick a wrong title and end up loosing interest in his master story telling.

Standalone Novels by Jeffrey Archer

  1. Not a Penny More, Not a Penny Less (1976)
  2. First Among Equals (1984)
  3. A Matter of Honour (1986)
  4. As the Crow Flies (1991)
  5. Honour Among Thieves (1993)
  6. The Fourth Estate (1996)
  7. The Eleventh Commandment (1998)
  8. Sons of Fortune (2002)
  9. False Impression (2005)
  10. A Prisoner of Birth (2008)
  11. Paths of Glory (2009)

‘The Clifton Chronicles’ Series by Jeffrey Archer

  1. Only Time Will Tell (2011)
  2. The Sins of the Father (2012)
  3. Best Kept Secret (2013)
  4. Be Careful What You Wish (2014)
  5. Mightier Than the Sword (2015)
  6. Cometh the Hour (2016)

‘Kane & Abel’ Books by Jeffrey Archer

  1. Shall We Tell the President? (1977)
  2. Kane and Abel (1980)
  3. The Prodigal Daughter (1982)

Apart from the above Jeffrey Archer has written lot of short stories, Children books and couple of Non-Fiction titles however they are not as popular as the titles mentioned above.

MBA Fresher Hiring to boost in 2015 – What B-Schools students should do?

A steady growth in hiring of MBA graduates is expected in 2015. Thanks to a forward-looking government at the centre and the majority support with them. Not only local, but global hiring trend is expected to see a uptrend in 2015. Graduate Management Admission Council, organizers of the globally accepted GMAT score, revealed that 9 in 10 employers hiring B-School graduates will either maintain or increase the number of offers to be made at campus. Also, more than half of the employers stated that they will increase the starting base salary being offered to MBA Freshers.Talking about India specifically, many companies are targeting to boost up their MBA hiring straight out of campus. Future Group, Citi, Godrej, KPMG, Whirlpool, PwC, Vodafone and Snapdeal have already acknowledged the increase in MBA fresher hiring this year. While companies across sectors have ambitious plans to increase campus hiring, they are looking at differentiated strategies — psychometric assessments and tests to select the right set of candidates, customised onboarding initiatives and even innovation challenges to pick out the best of the lot.

All looks good. So now is the time to think of what can you, as an MBA graduate, should do to grab the best of this opportunity. Grades definitely make you stand out of the lot, but are not the only criteria that companies evaluate.

Below are few things that should be worked upon in this coming placement season:

  1. Prepare yourself for new hiring methods: Companies are looking forward to adopt new and evolved hiring methodologies this year. So, it is time that you start preparing yourself to answer tricky psychometric tests, face group tasks or may be an extempore.
  2. Keep yourself updated: General and Business awareness are more important than what everyone think. A single fact stated in a group discussion or in the recruitment interview can turn the direction your way. Stating numbers from authentic sources always help in breaking into a discussion. Thereby, it’s time that you should read newspapers, journals, and magazines or may be few novels about which you can always talk about.
  3. Have an opinion: Everyone wants a candidate who can stand up for his/her role in the company and one of the criteria to judge this is identifying a candidate who stands by his opinion. Obviously to build an opinion on a subject, you will have to read and re-read at times in order to partially memorize it. Things will automatically flow when required if you have ever read about it somewhere.
  4. Hone a Hobby: Yes, you read it right. Developing a hobby can prove to be unfairly advantageous especially during personal interviews. Imagine a case where the only common thing between you and the interviewer comes out to be your ability to play a guitar. You can impress just by the sheer knowledge or dedication which you have shown towards the instrument. A lot of interviews at some point of time drop down to reading books. And if you have had a knack of reading books, you are half way through.

It is time to make the most out of the opportunity coming your way in 2015. We hope that you come out with flying colours in this placement season and keep shining on.

Good Luck.

Arpit Srivastava

Who is Steve Ballmer??

Biographical information on Steve Ballmer

Microsoft’s CEO Steve Ballmer will retire within the next year. Ballmer has worked at the company for the past 33 years, and has held the top job since 2000. Here are some biographic details on Ballmer:

Name: Steven Ballmer

Age: 57

Born: March 24, 1956. Ballmer grew up near Detroit. His father was a manager at Ford Motor Co.

Occupation: Chief executive officer of Microsoft Corp., which is headquartered in Redmond, Washington.

Education: Bachelor’s degree in mathematics and economics from Harvard University. He attended the Stanford Graduate School of Business but dropped out to start working at Microsoft.

Career: Before joining the company, Ballmer worked two years at consumer products maker Procter & Gamble Co. as an assistant product manager. He started working at Microsoft in 1980. Before becoming CEO, Ballmer’s roles at Microsoft included senior vice president of sales and support, senior vice president of systems software and vice president of marketing. He was named CEO in 2000, taking over the job from Microsoft founder Bill Gates.

Quote: “There is never a perfect time for this type of transition, but now is the right time,” Ballmer said in a press release announcing his retirement.

Friend and Foil of Bill Gates :

Steve Ballmer, Microsoft’s outgoing chief executive, was a close friend of company founder Bill Gates, but in many ways his opposite.

Ballmer, known for his competitive nature and outspoken, bombastic style, contrasted with the famously nerdy Gates.

The two were close friends at Harvard University, but Ballmer managed to graduate, while Gates became one of the venerable school’s most famous drop-outs.

Ballmer, the best man at Gates’s wedding in 1994, joined Microsoft in 1980 as operations manager, after a stint with consumer products group Procter & Gamble.

A native of Michigan, Ballmer grew up in the Detroit area, where his father was a Ford executive.

Ballmer, now 57, earned his Harvard degree in applied math and economics, and later attended the Stanford Graduate School of Business.

While Gates was the quiet, skinny computer nerd, Ballmer was a beefy, brash jock who liked playing basketball and once had to have surgery on his vocal cords after screaming out “Windows! Windows!” at a 1991 meeting in Japan.

Before becoming CEO in 2000, Ballmer was senior vice president of sales and support, senior vice president of systems software and vice president of marketing.

Independent tech analyst Jack Gold described Ballmer as a “masterful salesman” who “promoted Microsoft incessantly, and was hugely successful in his first decade.”

He drew criticism more recently, however, as Microsoft slipped behind longtime rival Apple and other tech giants.

“Lately (Ballmer) has lost touch with his marketplace and customer base. The infighting and turnover of execs has been dramatic. The seeming lack of vision he exhibited was destructive,” Gold said.

Ballmer nonetheless oversaw growth at Microsoft: revenues went from $23 billion in the fiscal year 2000 to more than $73 billion in the most recent year.

But the company’s market value slid from some $600 billion in 2000 to less than $300 billion today, and it has been overtaken by rivals Apple and Google.

In a memo to employees, Ballmer pointed out Microsoft’s progress since its early days.

“We have grown from employing just over 30 people to almost 100,000. I feel good about playing a role in that success and having committed 100 percent emotionally all the way.

“We have more than one billion users and earn a great profit for our shareholders.”

Despite more than 13 years at the helm, Ballmer has remained in the shadow of his former Harvard classmate Gates, who turned over the CEO job in 2000 and left the operations side in 2008 to focus on his philanthropic foundation.

While Ballmer has amassed a fortune of $15 billion, earning him the rank of 51st richest individual in the Forbes magazine ranking, that remains well behind Gates, who is number two worldwide and number one in the United States with $67 billion.