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SpiceJet to tie up with global low-fare carriers

SpiceJet to tie up with global low-fare carriers
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First Published: Thu, Jul 21 2011. 09 41 PM IST
Updated: Thu, Jul 21 2011. 09 41 PM IST
Mumbai: SpiceJet Ltd, India’s second largest low-fare airline controlled by media baron Kalanithi Maran of Sun TV Network Ltd, is exploring a different flight path for the second phase of its international expansion.
It is also talking to two airports in south India and one in Gujarat to set up its second regional base, after Hyderabad.
Currently flying two international routes—Colombo and Kathmandu—SpiceJet has applied for 10 more, including South-East Asia, West Asia and some destinations in the Commonwealth of Independent States. Its rival and India’s largest low-fare airline IndiGo has got permission to fly some key international routes—Dubai, Singapore and Bangkok.
“We will not be just a point-to-point carrier. We will create partnerships with other international low-fare carriers. They will sell our products and we will sell their products,” Spicejet’s chief executive Neil Mills said in an interview.
SpiceJet’s flights will feed into other international carriers and vice versa. Mills did not divulge details of international carriers the airline is negotiating with.
Leading low-fare carriers flying to India include Air Asia, Air Arabia and Tiger Airways.
According to Nawal Taneja, professor emeritus, department of aviation, Ohio State University, on almost every continent, there are similar instances of low-fare carriers tying up with each other.
As a majority of the low-fare carriers use Navitaire software for their reservation systems, it will be easy for SpiceJet to work with others, Mills said.
Unlike its rivals, SpiceJet is targeting non-traditional international routes that can be supplemented by alliances with international low-fare carriers.
According to Mahantesh Sabarad, a senior analyst with domestic brokerage Fortune Equity Brokers (India) Ltd, SpiceJet has no options but to opt for such arrangements, which are technically not code-share agreements but much like those in spirit.
Sabarad, who tracks SpiceJet stock, said these arrangements will widen the reach of the airline.
He cited some examples of low-fare carriers partnering with full-service ones to boost traffic. German low-fare carrier Air Berlin has not only entered into a code-share agreement with American Airlines, but has also decided to join a global grouping of international airlines—the oneworld alliance.
Spain’s Vueling Airlines is working with Iberia Airlines and British Airways.
Even as it talks to international low-fare carriers, SpiceJet is preparing to launch flights to smaller cities with 15 Q400 Bombardier planes, which are smaller than the Airbus 320 and Boeing 737 that form the mainstay of domestic fleet.
“We are talking to two airports in south India and one airport in Gujarat for a second base for these operations,” Mills said. The airline has already selected Hyderabad as the base for its regional operations.
It has delayed its plans to fly to smaller cities with smaller planes as its proposal to raise $270 million is yet to be cleared by the Reserve Bank of India (RBI).
“We are late by three to four weeks,” said Mills. He denied that finance agency Export Development Canada, from which SpiceJet is getting $270 million, has raised concerns over investigations related to Dayanidhi Maran, Kalanithi Maran’s brother, and actions he may have taken when he was telecom minister.
“Export Development Canada has given us an unconditional offer. We will be starting operations once RBI gives us permission,” he said.
SpiceJet will face tough competition from Jet Airways (India) Ltd and Kingfisher Airlines Ltd, which are also strengthening operations in secondary cities with smaller planes.
Increases in the price of jet fuel can derail SpiceJet’s plans, according to analyst Vikram Suryavanshi at domestic brokerage Antique Stock Broking Ltd. The company is especially susceptible when oil trades at more than $90 a barrel.
SpiceJet shares dropped 0.42% to Rs 35.85 on the Bombay Stock Exchange on Thursday. The benchmark Sensex fell 0.36% to 18,436.19 points.
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First Published: Thu, Jul 21 2011. 09 41 PM IST
More Topics: SpiceJet | Expansion | Neil Mills | IndiGo | Boeing |