After scripting a remarkable turnaround story, SpiceJet placed its biggest order for 205 Boeing 737 Boeing Max planes on Friday. This includes purchase rights for 50 aircraft. The airline’s promoter, Ajay Singh, shares his plans and challenges in a conversation with Aneesh Phadnis.
Are bookings back to normal or are you still feeling the pinch of demonetisation?
It is almost normal now. Immediately after November 8, we saw a significant drop in yield (revenue per passenger) and not so much of a drop in the load factor. This is because of the impact on discretionary spending due to demonetisation. About 94 per cent of our ticket transactions are carried out through electronic means and only six per cent are through cash. There was a sentiment impact but bookings are near normal now.
What will be the capacity addition till the third quarter of 2018 when the airline receives its first Boeing 737 Max aircraft?
We will continue to look at leasing opportunities. Our lease costs have reduced by 20 per cent and our aim is to reduce further. When a new aircraft enters service, the cost of older variants comes down. We hope to add 10-12 Boeing 737 planes till mid-2018.
Profitability will be under pressure due to weak rupee and rising fuel cost. How do you plan to tackle that?
The order for 155 Boeing 737 Max gives us the ability to reduce cost as the aircraft is 20 per cent more efficient. Our focus is going to be both reduction of non-fuel costs and increase in ancillary revenue. The share of ancillary revenue to the total was six per cent in 2014 and now, it is 16 per cent. Our attempt will be to remain profitable and will improve passenger yield through better network planning and revenue management.
Will we see a fare hike soon?
It all depends upon competition and it’s tough to say. We hope all airlines are looking at fare revision.
What are plans with regard to induction of Boeing 787 planes?
We are looking at various options to increase profitability and one of these could be introducing low-cost, long-haul routes. We are studying it and cannot give a timeline when we will induct the 787 aircraft. The deal which we signed with Boeing gives us an option to swap narrow-body Boeing 737 Max aircraft with wide-body planes.
SpiceJet's stock has been range bound between Rs 60 and Rs 70 for some time now. Do you feel the aircraft order will boost investor sentiment and price?
My focus has been running the operations and I’ve not focused actively on investor engagement. There is a huge difference in the market capitalisation of SpiceJet and the market leader (IndiGo) and that is perhaps unjustified. We hope the markets look at our performance and reward us and shareholders, appropriately.
Are you in talks to sell stake to foreign investors? Does the Delhi High Court order and the ongoing litigation with former promoter (Kalanithi Maran) affect that?
We are being approached by financial investors and airlines from time to time but we are not looking to dilute equity currently. We are in a comfortable position and have reduced our debt. There is an ongoing arbitration proceeding with the former promoter and I cannot comment on that. However, irrespective of the court order, there is no plan to sell stake now.
For the past 19 months, SpiceJet has been topping load factors. What is the secret?
It is a mix of good network planning, on-time performance, low cancellation rate and hot meals which we serve on board.
Dogfight between Airbus & Boeing
Two giants in race to sell fuel-efficient planes. While Airbus leads in India with big-ticket orders, Boeing clinches big order for B737Max from SpiceJet
- Total orders: 5,069 aircraft
- Entry into service: January 2016
- Launch customer: Lufthansa
- Biggest customer and number of planes ordered: IndiGo with 430 planes
Boeing 737 Max
- Total orders: 3,606 aircraft
- Entry into service: Second half of 2017
- Launch customer: Southwest Airlines
- Biggest customer and number of planes ordered: Lion Air with 201 planes