SpiceJet bets global expansion plan on early return of 737 Max aircraft

SpiceJet has played a major blind bet by leveraging its international expansion plans based on the possible early return of the Boeing 737 Max aircraft. The significance that 737 Max holds for the airline can be gauged from the fact that it will not induct anymore aircraft into its fleet, at least until early next year.

So sure is SpiceJet on the return of the Max by early 2020 that the company's CFO Kiran Koteshwar told IANS in an interview that the airline might get 25 or more aircraft at its disposal just after the plane gets re-certified for operations. Accordingly, the airline will cap its total passenger fleet to 119 aircraft till early 2020.

"We take a view on capacity addition on a quarterly basis. The expected return of Max by early 2020 will place more than 25 aircraft at our disposal," Koteshwar said.

"New routes will then be looked at from the surety of the type of aircraft which will be available to service them."

The airline has a firm order of more than 150 Max.

Recently, Boeing said that it was in touch with global aviation regulators, including India's DGCA, to get the aircraft re-certified for flying operations.

"The return of Max will give us the surety of operations and mitigate our reliance on 737NGs. We have not only suffered financial losses, but our growth and expansion plans have also been impacted due to the grounding," Koteshwar said.

Besides, the airline has initiated the process of seeking reimbursements from Boeing on the Max grounding.

The company has accounted over Rs 170 crore as losses incurred due to the grounding during Q2, 2019-20.

"This is just a partial figure. The overall figure will include the grounding, maintenance and opportunity costs. We have proposed a figure to Boeing, now we have to negotiate on it," he said.

Additionally, Koteshwar said the passenger yields remain under pressure due to the overall economic slowdown. However, he expects a short-term bounce-back.

"High base effect on the back of healthy growth during the last couple of years has eroded the volume growth rate. There are still volumes in the Indian market," he said.

Lately, the sector, which clocked healthy growth numbers with an average rise of over 20 per cent YoY, has seen a drastic fall in capacity and volumes. At present, SpiceJet operates 630 average daily flights to 64 stations, including 54 domestic and 10 international destinations.