SpiceJet Ltd Management Discussions.

Investors are cautioned that this discussion contains forward-looking statements that involve risks and uncertainties including, but not limited to, risks inherent in the Company’s growth strategy, acquisition plans, dependence on certain businesses, dependence on availability of qualified and trained manpower and other factors. The following discussion and analysis should be read in conjunction with the Company’s financial statements included herein and the notes thereto.

1. ECONOMY AND PROSPECTS1 a) Indian Economy

Financial year 2017-18 witnessed some major reforms. The implementation of Goods and Services Tax (GST) in mid-2017 saw initial challenges in policy, law, and information technology system triggered by its complexity and scale of change, which especially afiected the informal sector. However, there were expeditious responses soon to rationalise rates and simplify compliance burdens. Besides, there had been positive dialogue and developments eventually paving the way for a smoother GST regime.

The new Insolvency and Bankruptcy Code (IBC) was passed with the aim to address the issues of the Twin Balance Sheet and provide relief to stressed corporates in restructuring their business operations. IBC has provided a framework to enable resolutions and help corporates restructure their balance sheets and reduce their debts. Moreover, another critical move by the government was the announcement of a large recapitalisation package (about 1.2% of GDP) to strengthen the balance sheets of the public sector banks (PSBs). These much-awaited and critical reforms are expected to boost corporate spending and increase lending by the banks especially to the critical and, currently-stressed sectors of infrastructure and manufacturing.

Macroeconomic developments were in full swing during the year and India remained the second-best performer amongst major countries with strong macroeconomic fundamentals. India witnessed robust signs of revival in the second half of the year. Economic growth improved with the fading impact of the regulatory shocks, corrective actions being taken and the synchronous global economic recovery boosting exports. These solid improvements were tinged with anxieties related to macro-economic stability. Inflation was slightly higher than expected, as an outcome partly due to higher international oil prices - India’s historic macroeconomic vulnerability.

These dualities of revival and risk have been reflected in the markets with the rising bond yields leading to a marked steepening of the yield curve and soaring stock prices.

b) Outlook for financial year 2018-19

The outlook for financial year 2018-19 will be determined by economic policy in the run-up to the next national election. Growth is expected to start recovering towards its medium-term economic potential of at least 8% aided by macro-economic stability, stabilisation in the ongoing reforms and a buoyant world economy. The components of demand that are likely to influence the growth outlook are as under: The acceleration of global growth should in-principle provide a solid boost to export demand

Private investment is expected to rebound with the easing of factors exerting a drag on growth over the past year

Consumption demand, on the other hand, will encounter difierent tugs

On the positive side, growth is likely to be supported by the reduction in real interest rates in financial year 2018-19 compared to financial year 2017-18 average. At the same time, average oil prices are forecasted to be about 12% higher in financial year 2018-19 by the IMF, which will crimp real income and spending. Besides, real interest rates could exert a drag on consumption with higher oil prices requiring tighter monetary policy to meet the inflation target. On the back of all these factors, a pick-up in growth of nearly 7-7.5% in financial year 2018-19 can be forecasted; reiterating India’s position as the world’s fastest growing major economy.

2. INDIAN AVIATION a) Overview

The Indian market is comprised of the following airlines. The airlines have been categorised as Full Service Carriers (FSC) and Low Cost Carriers (LCC) based on the customer experience and operating models.

Airline Promoter Market Share (Domestic)2 Capacity Share (Domestic)2 Service Type3 Fleet Size3 Aircraft Type3
Air Asia Air Asia, Tata 4.04% 4.11% LCC 16 A320
Sons
Air India Govt. of India 13.10% 13.96% FSC 164 A319, A320,
A320N,
A321, B747,
B777, B787,
ATR42/72
GoAir Wadia Group 8.78% 8.63% LCC 32 A320,
A320N
Indigo InterGlobe 39.70% 40.36% LCC 163* A320,
Enterprises A320N,
ATR
Jet Airways Naresh Goyal 17.28% 17.03% FSC 120 A330,
B737, B777,
ATR72,
B737MAX
SpiceJet Ajay Singh 13.08% 11.34% LCC 60* B737, Q400
Vistara Tata Group 3.60% 4.37% FSC 19 A320

Source: 2. DGCA (Financial year 2017-18), 3. Service Type (FSC/LCC) is a term assigned by various analysts to these airlines. Company website and internet search (April 1st, 2018).

* Includes four aircraft on damp lease /wet lease

The route network deployed by these airlines cover a wide area of international, domestic, and regional market. However, 60% of trafic origination is concentrated around Bengaluru, Chennai, Delhi, Hyderabad, Kolkata and Mumbai. Besides, Tier II and Tier III cities have been contributing significantly to the recent growth.

India continued to be the fastest growing domestic travel market, witnessing 19% growth in domestic passengers and 14% growth in international passengers during financial year 2017-18, aided by an impressive annual growth of 22% in domestic passengers and 12% in international passengers during financial year 2016-17. However, the capacity growth in the respective domestic and international markets has been below the demand at 15% and 11% respectively (terms of ‘seat kilometres’). This reflected greater seat utilisation in terms of Load Factor which stood at 87% for domestic and 81% for international operations during financial year 2017-18 as against 84% and 78% recorded in financial year 2016-17.

The strong volume growth is driven by the "Low Cost Carriers" as the market share of the LCCs continue to rise with respect to the "Full Service Carriers" (FSC), characterising the price sensitivity and mass travel needs of the market.

The three listed airlines, which command a market share of 70%, posted operating revenues of C 553,267 million (approximately US$ 8,260 million) in financial year 2017-18 at a growth of 17%. This revenue growth, for these listed airlines came with a 3% increase in unit revenues (revenue per seat kilometre).

These are good indicators for a 15-18% forecast in sustainable volume growth in the domestic sector in the short term and 11-13% in the long term. The below-mentioned factors and fundamentals are likely to support the growth:

Favourable demographics and large pool of middle-class population, rising disposable incomes, modal shift from rail to air, widening route network and regional connectivity scheme is expected to strengthen demand

Geographical advantage of lying at crossroads of important international hubs

Economic growth along with the low aircraft penetration, presents a huge opportunity. Air travel penetration at 0.10 trips per capita is the lowest amongst developing nations including Brazil, China, Russia and Turkey*

Airports and supplementing infrastructure development will further unlock demand

b) Initiatives by Government of India

National Civil Aviation Policy 2016 cleared by the Indian Cabinet in June 2016 has seen a continuous progress. Some of the key initiatives proposed by the Government include:

The construction of 18 Greenfield airports in the country. These would be executed and financed by the respective airport promoters, and are estimated to require an investment of C 300,000 million

The revival of 50 unserved and underserved airstrips in three financial years starting from financial year 2017-18 at an estimated cost of C 45,000 million

The commencement of a new RCS (Regional Connectivity Scheme – Udan) called "Ude Desh ka Aam Nagrik" (UDAN) under which fares are capped at nominal fares to make air travel afiordable C 2,500 for specified seats for one-hour flight Doubling the number of airports in India over the next two to three years to cater to the increasing passenger trafic due to developing regional air travel market

* (Source: Airbus global market forecast 2018-2037)

Developing small airports with frugal facilities, and encouraging private airlines to bid for routes connecting these small airports with existing larger airports, thereby increasing regional air trafic

An outlay of C 40.86 billion has been proposed in financial year 2018-19 against C 26.93 billion (RE) in financial year 2017-18

A proposal to expand airport capacity more than five times to handle a billion trips a year under a new initiative – NABH Nirman. Balance sheet of Airport Authority of India shall be leveraged to raise more resources for funding this expansion

Government thrust on infrastructure development of the country will provide fillip to India’s aviation market. Allocation to Civil Aviation Ministry for financial year 2018-19 has increased to C 6,602.86 crore under Union Budget financial year 2018-19.

Some of the key initiatives proposed by the Government include:

Investment of C 17,500 crore for upgrading airport infrastructure by Airport Authority of India (AAI) over a period till financial year 2019-20

Permitting 100% FDI under automatic route in greenfield projects and 74% for brownfield projects

Approval of construction of 17 other greenfield airports in the country to be financed and executed by the respective airport owners at an estimated investment of C 30,000 crore

Announcement of NABH (NextGen Airports for Bharat) Nirman scheme to expand airport capacity by over 5 times to handle a billion trips a year

Development of 250 airports across the country by year 2020 to cater to the rising passenger trafic due to developing regional air travel market

100% tax exemption for airport projects for a period of 10 years boosting the growth of the airport sector

c) Factors that sustain the projected growth

As mentioned earlier, 60% of the originating domestic traffic is concentrated around Bengaluru, Chennai, Delhi, Hyderabad, Kolkata and Mumbai. With increasing economic activity in Tier II and Tier III cities, and the recent growth spurt observed in these cities, development of airports, scalability of existing airports, creation of secondary airport infrastructure like freeways, mass transit system "metros and railways", "aerocities", etc. will play crucial role. Airport Infrastructure is the single-most contributor to the development of aviation. While there has been significant upgradation of existing airports and increase in eficiencies and hourly movements, India needs to move on to creating secondary airports and ease the trafic from the main airports. This means airport privatisation, significant capital allocation and redefining the role of Airports Authority.

Indian market is price sensitive and has a seen a phenomenal growth in volumes. Pricing remains vital to this growth. Resultantly, the underlying cost structure of the airlines will determine the sustainability of the airlines. Volatility in international crude prices and fluctuations in the exchange rates impact the earnings significantly. During financial year 2017-18, oil prices increased by 11%; whereas Rupee appreciated by 4% as compared to financial year 2016-17. The beginning of financial year 2018-19 witnessed a sharp increase in the exchange rates and fuel prices as indicated below. However, LCCs with their leaner cost structures are better equipped to face such challenging operating environment.

3. DEVELOPMENTS AT SPICEJET

The Company continued its endeavour to strengthen operations and competitiveness with all initiatives focussed towards enhancing customer-centricity and improving its financial position. Aligned to these objectives, the focus has been on eficient network expansion, increasing customer experience through reliable operations, while making the flying experience more enjoyable. The Company continued on its core philosophy of rationalising costs and enhancing revenues.

a) Financial stability

SpiceJet is one of the few aviation companies in the world to deliver fourteen consecutive quarters of profitability after being close to a shutdown at one stage. As on March 31, 2018, Balance Sheet further strengthened with the cash balances standing at C 1,458 million; in addition the net worth of the Company increased by C 5,662 million. The Company has taken adequate provisions in its financials to reflect a fair view of its liabilities and future maintenance obligations.

b) Fleet and network augmentation

In financial year 2016-17, the Company placed an order of up to 205 (155 firm and 50 option) Boeing 737 MAX aircraft committing itself to a strategic direction and a planned growth. The US$ 22 billion (C 1500 billion) aircraft order is the biggest ever placed by any Indian airline with Boeing in its history and marks the beginning of a growth story, which will see the airline expand its wings – both within and outside the country. Further, in order to strengthen its regional connectivity, the Company had also placed order for up to 50 Bombardier Q400 aircraft. The delivery of this new aircraft commenced in middle of financial year 2018-19.

Today, SpiceJet operates 38 B737 family aircraft. During the year under review, the Company achieved impressive aircraft utilisation of over 12 hours per aircraft-day. The Company’s initiative towards network optimisation, delivering consistent and impressive ‘On-Time-Performance’, and providing seamless connectivity to its customers enabled it to achieve sustained monthly passenger load factors of above 90% for 42 months in a row (a feat unparalleled globally).

Route additions

During financial year 2017-18, SpiceJet opened 36 new routes. The fact that the airline won 6 RCS routes was of primary significance, of which 4 commenced in financial year 2017-18. These include operations to Mumbai-Porbandar, Mumbai-Kandla-Mumbai, Jaipur-Jaisalmer-Jaipur and Hyderabad-Pondicherry Hyderabad. The remaining 2 routes commenced in early financial year 2018-19.

During financial year 2017-18, the Company added these routes – Ahmedabad to Bangkok and Varanasi; Delhi to Bangkok; Bengaluru to Bagdogra, Madurai, Patna, Pondicherry, Rajahmundry, Tirupati, Thiruvananthapuram; Mumbai to Kandla and Porbandar as RCS routes; Mumbai to Patna, Surat; Kolkata to Jabalpur, Patna, Surat; Goa to Surat and Jodhpur to Surat; Jammu to Dehradun, Jaipur; Delhi to Jaisalmer, Port Blair, Patna; Guwahati to Dibrugarh, Jaipur; Hyderabad to Chandigarh, Surat, Patna and Pondicherry as RCS flight; Chandigarh to Jammu, Jaipur; Chennai to Mangalore and Patna; Jaipur to Jodhpur, Surat, Varanasi, and Jaisalmer as RCS flight; Thiruvananthapuram to Male.

During early financial year 2018-19, the Company added these routes - Delhi to Adampur, Hubli to Hyderabad and Chennai, and Delhi to Kanpur were commenced on RCS routes. Further, RCS routes connecting Pakyong with Kolkata and Guwahati will be launched during this winter.

This fiscal will see more additions during the winter, viz. Kolkata to Varanasi; Delhi to Kishangarh, Coimbatore, Shirdi; Kanpur with Mumbai and Kolkata; Guwahati to Patna; Amritsar to Goa; Hyderabad and Amritsar to Bangkok; Hyderabad to Kozhikode, Guwahati; Chennai to Rajahmundry; Bengaluru to Tuticorin, Varanasi, Udaipur.

c) Revenue enhancement and new ancillary streams

Revenue maximisation efforts

The Company conducts a detailed and close flight monitoring for almost 24 hours with proper coordination between network and revenue departments to ensure timely action to maximise revenue and increase the load factors. Pricing remains core to SpiceJet’s "maximisation objective". The Company has achieved highest unit revenues in any financial year in its history and continued with record-breaking highest load factor for 42 consecutive months at the same time. This indicates that capacity infusion was non-dilutive on its revenues. This incredible performance has led to yield divergence with respect to the overall market dynamics.

Passenger-related ancillary revenue measures

On the product front, the launch of interesting combo products like seat + meal and YouFirst (priority check-in + priority baggage) by the airline has received impressive response from its customers. Additionally, the airline has launched a series of niche products focussed around services like Visa, International Connection Baggage, Gift Cards, SMEs, No Shows, Hold Bookings and lean flights.

The latest and the biggest launch by the airline recently has been the loyalty programme intended to build a large loyal customer base that will increase airline’s direct bookings for flights as well as boost sales of ancillary products. The programme has been designed to benefit frequent fliers in many ways.

Various deals and officers to boost web and mobile app-based transactions have been rolled out during the fiscal year. These include the customer level officers in association with major banks and BFSI in India such as HDFC, ICICI, SBI, American Express, IndusInd, Standard Chartered, Yes Bank and Paytm. These deals and officers have generated incremental transactions and increased direct trafic. Moreover, these officers are centred on strengthening flights bookings and ancillary products like Spicemax, Seats, Meals and Priority check-in etc.

SpiceVacations

During the year under review, the airline had undergone a complete revamp of its product and website to make it more attractive, responsive and in line with other competitive websites. There has been a huge uplift in terms of business numbers as well as on success metrics like trafic, bounce rate, average time spent and other relevant parameters. The Company has recently launched activities portal on the SpiceVacations platform called Spice Experiences. Spice Experiences is aimed to ofier a wide range of bookable destination specific activities like para sailing, scuba diving, hiking, airport transfers and local transport to customers.

d) Cost reduction measures

Cost reduction is an extremely important and crucial exercise in a price sensitive market. The Company’s relentless efforts of reducing costs included asset utilisation, manpower optimisation, and resource productivity. During the year, SpiceJet and CFM International entered into a US$ 12.5 billion agreement for purchase of LEAP-1B engines to power its 155 Boeing 737 MAX fleet along with spare engines. This order will significantly reduce the engine maintenance costs for SpiceJet’s new MAX fleet. The Company also focussed on improving employee productivity, fuel-saving methods such as fuel hedging and lightweight seats, improvement in eficiencies of key functions like cargo handling, lower aircraft acquisition and maintenance costs and reduction of training costs.

e) Brand consolidation

During financial year 2017-18, the Company’s brand continued to gain momentum and achieved new record. Given the critical phase of growth that the brand had entered, albeit flyers assumed an even greater significance. On the back of one of the biggest Boeing orders placed both in the country as well as in the history of Boeing, it was pertinent that the airline keeps aligning itself with flyers. This resulted in SpiceJet constantly recruiting new generation of flyers from the existing markets as well as exploring new markets of growth. Simultaneously, the brand focussed on constantly introducing novel ofierings and re-inventing the existing ones in order to turn new recruits into patrons.

At the business level, the masterstroke of aggressive bidding for the Regional Connectivity Scheme or UDAN (Ude Desh ka Aam Nagrik) routes gave impetus and access to new flyers. These emerging markets promise an enormous potential and will enable SpiceJet brand to reap the benefits in the years to come. These markets included Porbander and Kandla (Gujarat), Pondicherry (Tamil Nadu), Jaisalmer (Rajasthan), Kanpur (Uttar Pradesh) and Adampur (Punjab). Besides, SpiceJet reiterated its focus on its existing initiatives such as the Loyalty programme, SpiceClub and the premium economy ofiering, SpiceMax. With the introduction of SpiceClub, the brand manages to ofier maximum benefits and rewards to its patrons for the airline. The brand ensures repeated interactions with an expanding category of the most lucrative flyers by enhancing the membership of the loyalty programme. Products like SpiceMax ensures a superlative and delightful flying experience for the the discerning flyers.

Going forward, SpiceJet also introduced SpicEngage, the in-flight entertainment system. This first-ever in-flight entertainment system ofiered by a low cost airline is a novel initiative designed to act as another difierentiator in the category and is capable of re-enforcing the pioneer image of the brand. Association with several properties directed to target the youth segment like Sunburn, Rajasthan, International sporting events etc. helped the brand to underline its ‘fun’ positioning. Simultaneously, the brand also renewed its social media outreach to this category of flyers by re-examining its content. Driven by its customer-centricity approach, brand will continue to achieve greater success and glory in the years to come.

c) Revenues

SpiceJet’s total revenues improved by 26% to C 78,794 million in financial year 2017-18 from C 62,714 million in financial year 2016-17.

Revenue from operations increased by 26% to C 77,951 million in financial year 2017-18 from C 61,913 million in financial year 2016-17.

Other income increased by 5% to C 843 million in financial year 2017-18 from C 801 million in financial year 2016-17.

d) Expenses

Total expenses for financial year 2017-18 increased by 25% to C 70,424 million from C 56,480 million in financial year 2016-17.

i) Aircraft Fuel and Oil

Expenditure on aircraft fuel increased by 31% to C24,326 million in financial year 2017-18 from C18,552 million in financial year 2016-17. This increase is in line with increasing number of flights and higher oil prices.

ii) Lease Rental-Aircraft and Engines

Expenditure on lease rental-aircraft and engines increased by 8% to C 10,369 million in financial year 2017-18 from C 9,606 million in financial year 2016-17. This is a result of expansion in fleet.

iii) Aircraft Maintenance Cost

Expenditure on aircraft maintenance cost increased by almost 38%. The increase in maintenance and repair costs in financial year 2017-18 was towards increasing the capacity enhancement.

iv) Employee Benefits / Expenses

Expenses with regard to employee remuneration and benefits increased to C 8,626 million in financial year 2017-18 from C 6,735 million in financial year 2016-17, an increase of 28% primarily due to increase in the fleet size.

v) Selling Expenses

Selling expenses increased by 6% to C 2,217 million for financial year 2017-18 from C 2,093 million for financial year 2016-17. The increase is mainly due to increase in the revenue.

vi) Other Expenses

Other expense increased by 21% mainly due to increase in capacity.

vii) Finance Cost

Finance cost have increased during financial year 2017-18 by 42% to C 922 million from C 650 million in financial year 2016-17 due to increase in borrowings.

viii) Depreciation and amortisation

Depreciation and amortisation increased by 16% to C 2,312 million in financial year 2017-18 from C 1,986 million in financial year 2016-17.

5. OPPORTUNITIES, RISKS, CONCERNS AND THREATS

The Indian aviation industry is expected to continue delivering a robust performance on the back of strong economic growth, expanding middle-class group and working population, business and leisure travel growth and expansion of aviation infrastructure. There has been impressive growth in domestic and international passenger trafic in recent times. Moreover, the untapped markets of Tier II and Tier III cities present huge growth opportunities aided by strong demand of air travel in these centres. Triggered by its strong foothold in domestic market, innovation-led excellence, customer-centricity, focus on network expansion and improving profitability, SpiceJet is well positioned to capitalise on the burgeoning aviation sector.

Risks and concerns on profitability include (a) rising crude oil prices; (b) the compounding effect of taxation on fuel costs; (c) fluctuations in foreign exchange rates and (d) sensitivity of demand due to inflationary environment. Fuel costs can be mitigated through adequate hedging and direct import which will be taken at appropriate time. Another major challenge is the inadequate airport infrastructure in the country afiecting the operations of the airlines. Threats can arise from irrational pricing behaviour and/or uncontrolled capacity infusion. Irresponsible growth and over concentration in certain markets by incumbents remain a threat.

6. FUTURE OUTLOOK FOR SPICEJET

Pricing levels in the industry remain a challenge in the wake of increasing costs; however, the new fleet inductions results in significant savings in unit costs to stay insulated. The Boeing MAX brings in cost reduction of around 12-14% per aircraft as compared to the earlier generation; while Q400 will increase the seat capacity from 78 to 90 and will improve performance that will bring in 8-10% reduction in its unit costs.

The Indian aviation industry is on a high growth trajectory led by a strong market growth rate coupled with infrastructuredevelopmentandairlineexpansion.Duringfinancialyear2017-18,SpiceJetstrengtheneditsoperations and explored new growth avenues through the UDAN programme. The Company plans to add 10-12 Boeing 737 MAX aircraft and 5 Bombardier Q400 aircraft to its existing fleet before December 2018. On the Bombardier Q400 aircraft, the seat count has been increased to 90 seats. This will enhance the seats flown in the regional and UDAN routes. Moreover, with a record aircraft order of B737 MAX, the Company endeavours to expand domestically and internationally to improve profitability and operating performance. The Company has also adopted significant initiatives to increase its ancillary revenues and constantly looks at new ventures to spur its passenger trafic. Pricing levels in the industry have firmed up and reflect the underlying cost structure. The massive aircraft order, cost reduction initiatives and scaling of operations reiterate the long-term growth strategy of the Company. With demonstrated profitability and robust demand, increase in SpiceJet’s capacity addition is imperative to garner a healthy market share.

The Company, through its brand "SpiceXpress" has laid down a detailed plan for the launch of air cargo services covering both domestic and international routes. Much like SpiceJet’s commercial passenger aircraft fleet, the airline’s freighters fleet will consist of Boeing 737 planes and will be operated on an incremental direct operating cost model and will extend its operations through its common pool of resources like pilots, engineers, ground stafi and airport infrastructure. The first freighter aircraft inducted by SpiceJet is a Boeing 737 NG Freighter. SpiceJet plans to have a dedicated air cargo fleet starting with the first four freighters scheduled to be inducted by March 2019 and will ofier India’s largest door-to-door air cargo service.

This is an extension of its ‘belly cargo’ service to a ‘dedicated freighter’ with Boeing 737 aircraft. Furthermore, the Company is capitalising on its proven operational capability and the huge growth potential ofiered by the logistics industry. These freighter aircraft are acquired on pure operating leases and haven’t incurred any major CAPEX, while the ground operations will be either self-handled by the existing SpiceJet ground infrastructure or shall be outsourced till the development of a certain scale of operations. SpiceJet currently officers cargo capacity on its passenger aircraft fleet of 38 Boeing and 24 Q400s operating across 49 domestic and 7 international destinations. The added capacities through the acquisition of the freighters will enhance the airline’s existing cargo competence to 60 domestic destinations by the end of 2018. The air cargo trafic in India is expected to grow by 60% in the next five years. The Indian logistics industry which provides employment to more than 22 million people has grown at a compound annual growth rate (CAGR) of 7.8% during the last five years and is expected to touch a worth of US$ 215 billion in the next two years. Eyeing the huge growth potential in both domestic and global markets fuelled by the ever increasing e-commerce boom, SpiceJet aims to shore up SpiceXpress’s existing capacity, transforming it into a full scale freighter cargo service.

In summary, the Company’s management is working on every aspect ranging across revenue maximisation, cost reduction, employee welfare and productivity, customer retention, brand awareness and reputation, etc. in its efforts to create and sustain a world-class airline.

7. INTERNAL CONTROL

The Company has put in place strong internal control systems commensurate with its size and scale of operations. Latest technology is used to ensure efficient and effective internal controls in the business. The Company has adopted risk-based framework for effective risk mitigation with increased transparency and accountability as well as for ensuring compliance with all statutory requirements under different legislations.

Internal controls are designed to provide reasonable assurance regarding the following:

Effectiveness and efficiency of operations
Adequacy of safeguards for assets
Prevention and timely detection of frauds and errors
Accuracy and completeness of the accounting records

The Company also has strong team of professionals for executing internal audit function which comprise its employees as well as services of reputed auditing firms. Internal audit function has implemented risk based internal audit plan to ensure increased coverage and assurance on operating effectiveness of internal controls in the Company. Audit observations are periodically presented to Senior Management and the Directors for taking adequate, effective and timely measures to address the deficiencies identified.

8. HUMAN RESOURCES

As the Organisation embarks on its next growth phase, it is imperative for the Company to build Leadership bandwidth, Organisation structure and People processes, to keep pace with the high energy Operational delivery at a high level of Operational excellence. During the year under review, SpiceJet continued to attract critical talent as a result of which the overall employee strength increased from 6,902 in April 2017 to 8,447 in March 2018. Structured and well calendarised "roadshows" for Inflight and Flight Operations ensured continuation of the required numbers. The Company ensured 75 internal job postings. Resultantly, the existing workforce of SpiceJet found avenues to grow professionally outside their regular work areas.

The quarterly individual achievement recognition programme to identify the "Spice Stars" was launched during the year with a lot of fanfare. An automated process ensured timeliness and control on the entire flow of the programme. A large number of people got recognised and strived harder to find a place on the pedestal. The "Long Service" award continued with increased fervour, with 950 more people coming within this ambit.

The Company continued to promote the culture of equality and diversity with more than 30% of women being recruited in its workforce. Two complete batches of 29 lady pilots were hired to reinforce the organisational commitment to this direction. Moreover, a full-time psychologist was brought onboard to provide emotional counsel to deal with workplace-related issues and personal challenges.

The Company continued to work on simplifying internal processes through a collaborative effort to ensure that employees are delivering their best results. It continued with its journey of rewarding outstanding employees by honouring them with annual awards for excellence. The focus was on making the internal processes more agile to cater to the needs of a predominantly millennial workforce. The digitisation of the entire HR processes was initiated to have a technology-driven HR interface.

SpiceJet strongly believes in enhancing the skill-set of its employees so that they can embrace the emerging technologies and the ever-changing, dynamic corporate world. To accelerate the learning capabilities of SpiceJetters, the Company invests deeply in various learning and development interventions.

SpiceJet strives to create an atmosphere where its employees are deeply engaged, committed and work with enthusiasm. Employee Engagement continues to be a key indicator to measure employees’ involvement and dedication in the organisation. During the year, SpiceJet participated and won several events at the Skylympics 2018, a mega national level sporting event where its employees competed against employees of the other aviation companies.

The Company conducted numerous fun activities/health camps and celebrated festivities throughout the year to encourage a culture of fun along with work. Regular employee interaction HR forums were conducted to provide greater understanding of the employees’ voice at the workplace. Besides, Employee grievances and issues were addressed and shared with concerned groups to provide equal opportunity to all at the workplace. The Company follows a gender neutral approach in handling all kinds of complaints and grievances to ensure a conducive, safe and secure workplace for women employees.

The tie-up with Amity University resulted in a large number of employees opting for online distance education through "Learn while you Earn" programme. This programme continued during the year, with SpiceJetters and their spouses getting exclusive 50% discounts on course fees for pursuing higher education with Amity University.

9. INFORMATION TECHNOLOGY

Information Technology plays a pivotal role in the management of airlines. Communication is a key aspect in air travel, and technology is serving to enhance communication between airplanes, airports, airlines and passengers. In the days to come, self-service and mobile-based technologies will be vital for consumer satisfaction. The past couple of years have witnessed a huge disruption in the mobile and digital payment space. India is now home to one-fifth of the world’s mobile subscribers. Mobile technologies and emerging web technologies are at the heart of the digital journey that SpiceJet has embarked upon.

At SpiceJet, its teams are working relentlessly to create an environment that provides comprehensive solutions around mobile and new-age web technologies. SpiceJet has upgraded its core Passenger Service System, Navitaire to the most recent version. This upgradation is likely to bring in robust infrastructure and new enhancements which would help the organisation to run its core functions, including revenue management with more agility. The current mobile site will be replaced with a Progressive Web Application (PWA). The current website and mobile application will also be replaced by a state-of-the-art mobile app and website.

New tools have been created to improve eficiency, reduce manual work and maintain data integrity. A rostering solution for engineers has been developed to prevent controllable delays and increase employee eficiency. An application has been built for the crew to fill all the technical logs digitally, which will drive predictive maintenance and taking proactive measures by looking at the data trends.

Keeping customers at the heart of everything, SpiceJet has introduced effective personalised communication with its customers by integrating Sales Force CRM. Additionally, the existing calling management tool allows call agents to have a 360 degree view of the customers and their past history, call details and social interaction with SpiceJet.

In a first-of-its-kind in the Indian aviation industry, SpiceJet cabin crew have started using Android Tablets on board for managing inflight catering. This application not only enables the crew to digitally record sales achieved onboard but will also help in recording customer preferences to serve them better.

In another industry first initiative, SpiceJet, India’s most innovative airline allows passengers to book tickets, check-in and manage their journey through Facebook messenger. SpiceJet customers can also check in and manage their booking through WhatsApp messaging service.

BRS (Baggage Reconciliation System) has been further automated to ensure baggage tracing process is done based on IATA Resolution 753, where passengers can see real-time reports for mishandled baggage.

In its endeavour to automate and digitise employees’ operations, a state-of-the-art HRMS solution has been implemented. The new solution will automate recruitment management, document library, workflow management, onboarding process, time tracker, attendance, leave and rostering management, time sheets, reimbursements, claims and other HR processes. A crew portal has been designed to digitise the crew journey and empower them to interact with difierent departments.

Going forward, data, mobile and innovation continue to remain the key aspects of the digital journey at SpiceJet.