SpiceJet plans expansion ahead of going international

SpiceJet plans expansion ahead of going international
PTI
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First Published: Sun, Jul 05 2009. 12 15 PM IST
Updated: Sun, Jul 05 2009. 12 15 PM IST
New Delhi: Leading no-frill carrier SpiceJet is working on fleet acquisition plans and analysing routes as it aims at launching international operations by May next year.
“We are analysing all aspects of it. We are studying in which markets bilateral rights are available, what are the routes,” airline CEO Sanjay Aggarwal told the agency in an interview in Delhi.
An airline has to complete five years of domestic operations and have a fleet of 20 or more aircraft before it is allowed to fly abroad.
SpiceJet operates over 125 domestic flights to 18 cities daily and would fulfil the eligibility criteria for international operations on 23 May, 2010.
The company has not yet decided on whether it will go for purchase of new aircrafts or would lease planes. Aggarwal said “capacity decisions have to be taken. We may lease planes instead of buying any as a lot of them are now available in the market.”
“We are evaluating international operations as also regional connectivity, coupled with our fleet order. These are expensive decisions. Therefore we have to take smart decisions,” he added.
The airline is also planning to expand into tier-II and tier-III destinations, which have a huge potential.
To serve these routes, the SpiceJet CEO said ”we are exploring smaller aircraft operations. These aircraft will be used primarily for two-tier markets.“
Planes, which can carry 60-70 people like turbo-prop ATR and Canadian Regional Jets, were being looked at by the airline for mounting operations to smaller cities. SpiceJet currently has a fleet of 21 Boeing 737-800 and B 737-900 (extended range) aircraft.
To questions on rising fuel costs which generally account for over 40% of an airline’s operating costs, Aggarwal said “we are trying hard to be fuel efficient. We started hedging a few months ago some of our fuel requirements.”
In May-June this year, the airline saw “a positive cash flow because of the hedging,” besides the earnings from fuel surcharge,” he said, adding though a small amount was hedged, “it is a good investment that we made”. SpiceJet has an annual fuel bill of about Rs750 crore.
Globally, several airlines hedge on aviation turbine fuel which means forward selling and buying of ATF to improve their bottomline.
To questions on its financial position, Aggarwal said due to significant reduction in the number of flights in past year, “more revenue was generated in May. We have never been healthier as we are today” but added that the next quarter may not be as good as this.
The SpiceJet CEO said their revenues ”continue to look up. Our bottomline is also good with major cost control measures and improvement in product quality.“
He said in the last ten days of June and soon after elections, “the demand was much better than expected. There could be some signs of marginal recovery.”
However, according to Aggarwal, the sector might see some consolidation the future. “There are opportunities in India. There are too many players in the market. It is only a matter of time,” he said.
But the future of the sector is bright. Indian aviation would grow “faster than the airlines can add capacity (or aircraft). They (operators) will not be able to provide planes to meet the fast growing needs in the coming months,” he said.
“The pie is going to grow much bigger than can be imagined. Conservative estimates are that air traffic demand will grow by 73% by 2014, while the growth in capacity will be 41%,” he said.
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First Published: Sun, Jul 05 2009. 12 15 PM IST
More Topics: Aviation | Spicejet | Boeing | Expansion | ATF |