Did management intervention push Neil Mills out of SpiceJet?
 

Did SpiceJet, a low-cost carrier owned by Kalanithi Maran of the Sun media Group, lose two of its top bosses due to owner group’s efforts to directly intervene in the management of the airline?

The airline has just seen the exit of CEO Neil Mills, a long-standing aviation professional, and last month it lost its Chief Commercial Officer Harish Kutty. The group is now believed to have entered into some understanding with a Far East-based airline for an equity investment. Though the equity investment is yet to be committed, a broad understanding has been reached between the two potential partners. However, the fact that talk of investment surfaced just around the time the airline was about to LOSE top professionals suggests that there is a link.

Sources Firstpost spoke to said the current downward spiral of SpiceJet coincided with the elevation of S Natrajhen from Executive Director to Managing Director in September last year. “This placed him above the CEO. Nothing wrong with this, except that Natrajhen knows little about the airline business. Mills was suddenly being bypassed and this created confusion. Against his wishes, Mills was asked to make an unprecedented number of route changes, sudden flight cancellations – he was even asked to go and raise money from travel agents for working capital financing. No one in the airline had the guts to tell Natrajhen that this was the most unprofessional way of running an airline,” the source said.

But a SpiceJet spokesperson refuted this, saying Natrajhen was not only trusted by the promoters but also a professional himself. He said Natrajhen had been with the Sun Group for 25 years and with SpiceJet since 2010. “He is not just trusted but also very capable. His capability is evident in the fact that the airline is running smoothly despite Mills’ (impending) departure. SpiceJet is the only airline in India with two positions, of MD and CEO, and work was always clearly divided. It is incorrect to say that we don’t have professionals. Take for example Sam Issac, the CFO, who is a thorough professional.”

The airline has been getting deeper into debt and has significant operational issues. Industry sources say that the promoters want to manage the airline through “trusted” family representatives instead of allowing professionals a free hand. They suspect that the arrival of a foreign strategic investor may have very little to do with the top management reshuffle at the airline.

The SpiceJet spokesperson declined to answer questions over the back-to-back departure of Mills and Kutty, saying it must have been for personal reasons.

Mills’ resignation is yet to be accepted by the airline’s board of directors, he added.

SpiceJet has been having a tough time on many fronts lately. Its debt has more than doubled to Rs 1,429 crore in FY13 (2012-13) against Rs 650 crore in the previous fiscal; the share price has tumbled by about 13% in the last 12 months (as per a note to clients by ICICI Direct) and brokerages expect it to fall further. Then, it has also suffered because of currency volatility since almost 50% of its operating costs are exposed to currency exchange risks. SpiceJet has also seen the worst on-time performance for all Indian carriers in the last few months.

The airline’s spokesperson explained away several reasons for flight delays, on-time performance slipping and frequent route changes but refuted the suggestion that there was any issue at all with operational efficiency.

The absence of a clear chain of command was also alluded to by another seasoned aviation professional we spoke to, who said there were suddenly multiple power centres within the airline after Natrajhen’s arrival. This obviously created some operational issues.

By January 2013, the promoters perhaps finally began to see that all was not well with the airline despite the trusted Natrajhen steering it. So the Marans then appointed two more of their lieutenants – SL Narayanan and Sridharan – to figure out what ailed SpiceJet. Narayanan is Group CFO for the Sun Group whereas Sridharan is an advisor to the SpiceJet’s board of directors. It is not clear the injection of more Maran representatives helped.

Sources we spoke to said that while Narayanan was a seasoned finance professional, he had no idea about the vagaries of the aviation business.

Ditto for Sridharan. These two gentlemen would fly down to SpiceJet’s Gurgaon office every week, review all major decisions and, more often than not, rescind these decisions. “We had finalised an advertising agency, approved a brand makeover and marketing campaign. These two guys came in and suddenly asked us to not only change the agency but also pull out that campaign. Things like this could prove disastrous for SpiceJet’s brand image”.

It is clear from this chain of events that Mills’ departure could not have come at a worse time for SpiceJet. A report by ICICIDirect analysts Rashesh Shah and Sneha Agarwal had pointed out earlier this month that SpiceJet’s rapid fleet expansion (number of departures up 27 oercent year on year) when passenger traffic is declining means yields (revenue per passenger) would fall going forward. “This, in turn, may put pressure on the company’s debt servicing ability. Its debt has more than doubled from Rs 650 crore in FY12 to Rs 1,429 crore in FY13 while reporting losses at the operating level over the past two years. Given the slowdown in traffic, this expansion, we believe, would lead to higher losses over the medium term”.

Now, only an equity investor with sustained interest in improving the fortunes of SpiceJet can perhaps mend what’s broken.

Did management intervention push Neil Mills out of SpiceJet? - Firstpost

It is indeed true that Mr. Natrajhen has almost nil experience in aviation. But I have met him personally during my stint in Spice and I can tell you that he himself admits that he has entered an alien world. But I can vividly recall my 2.5 hrs from DEL to MAA as the shortest because he picked my brain to pieces trying to understand the operational aspect of an airline.
From my experience in Spice, it was a rag tag operation run by managers who were at the fringes of aviation experience and competence. All you have to do is compare the trajectory of Indigo with Spice's and see where these two airlines stand.
Needless to say a revolving door of majority ownership has deprived Spice of a long term strategy owing to opportunistic PE players who were interested in a quick buck before they moved on to their next venture. Mr. Mills' exit is just another chapter in the sorry saga that is Spice. I only wish the best for my former colleagues in another wise hopeless situation.:sad:

Jack Ekl | get him back
 

They should get Jack Ekl back to set the place right. he'd be the perfect CEO, he'd kick everyone's posterior and clean up the place.

I dont think i'd like to air their dirty linen in public, i left SpiceJet nearly 8 years back. After JAck left, that place dealt with enough scandals including the 'fake-pilot-interview' scam.