Mumbai: The entry of AirAsia Bhd into India in association with the Tata group will be negative for SpiceJet Ltd given its significant presence in Chennai and exposure in smaller cities, JP Morgan Securities Singapore said in February. Neil Mills, chief executive officer of SpiceJet, isn’t too perturbed by that or by Jet Airways (India) Ltd and Etihad Airways working towards a deal in which the UAE carrier will pick up a stake in the Indian one. The investment activity picked up after the Indian government permitted foreign carriers to invest up to 49% in domestic airlines in September. Mills joined SpiceJet in October 2010 when it had 22 planes. Under his watch, the carrier has more than doubled its fleet to 52, started the process of importing jet fuel directly, changed the mix of planes by adding Bombardier Q400s for regional operations to its Boeing 737s and is looking to float an alliance with an international low-fare carrier.

Mills spoke in an interview on Sunday night at the venue of the Routes Asia conference organized by the GVK group. Edited excerpts:

You said in November that you were expecting the first shipment of jet fuel worth 50 crore in January, with just one bureaucratic hurdle to be cleared. You were the first airline to get clearance to import jet fuel.

Yes, we were expecting the first shipment. All commercial agreements for importing aviation turbine fuel (ATF) are already in place. (There’s) just one bureaucratic hurdle from one of the ministries. We are yet to get a green light for (this).

I can’t give you the details. Yes, the shipment has been held up for the last seven months because of bureaucratic delay.

How are the regional operations doing?

It is going good. We have 112 flights a day. We have the highest utilization of Bombardier Q400s in the world. Though there were some teething issues and we had to withdraw from some of the routes, the regional operations are a big success.

How much does it contribute in terms of revenue? Will you add more such planes?

We don’t provide segmented revenues. Yes, we may be adding four to five Bombardier Q400 planes in the next fiscal. We have 15 Bombardier Q400s and we have options for buying 15 more. Whether we convert those options into firm orders or we lease four to five planes, it depends upon the situation.

GoAir is also examining options to start similar regional operations. Jet is also aggressively expanding.

Any logical competition is welcome. GoAir or IndiGo are posing a logical competition. By the way, Jet Airways is not expanding. They are just replacing the old ATR planes with the new ones.

Indian airlines are busy talking to foreign carriers after the government relaxed the rules? You were also contemplating joining hands with an international low-cost carrier?

We are in no hurry to do that. We are not in a position to do a deal overnight. We will take our own time. We are paying our staff salaries on time. We had speculative discussions with foreign airlines and private equity players. Nothing has moved forward from there. Everybody is tasting everything that is available in the market. But I must tell you that SpiceJet is a hugely attractive target for a potential foreign direct investment. Regarding an alliance with an international low-fare carrier, we are open to having a sensible alliance with a low-fare carrier. But nothing has been finalized yet.

How much funding do you require for expansion plans and are promoters putting in any money?

As I said, we are not in need of funds. The promoters have put in money in multiple tranches. The promoters hold a 53% stake now in the airline.

Jet Airways recently sold its Heathrow airport slots to Etihad Airways and leased it back indicating that a potential deal is in the making for Jet and Etihad.

I’ve never heard of such a thing. I am not aware of any operator selling its slot facilitating an airline to land in a hugely slot-constrained Heathrow. This is like selling family silver outside. Even Kingfisher Airlines has not done that.

Analysts say that SpiceJet would be hit the most by the AirAsia venture.

As I said earlier, any rational and logical competition is welcome. Based on the competition posed by AirAsia, we can make the changes then. But how can AirAsia get a low-cost advantage in India? This is not Malaysia. There are a lot of issues in India where AirAsia will have no influence. Where will the efficiency come from? The airport charges and jet fuel costs are high. SpiceJet is not paying a huge salary. I am just paying market-driven salary. Fifty-five percent of our cost is ATF, 12-13% is employee cost, aircraft cost is 8-10%. Where will the flexibility come from? We are also having better turnaround of aircraft and lower employee-aircraft ratio. We have 700 staff in airport security. We don’t want that many. But we are mandated to do that. So I don’t understand where will the advantage come for AirAsia? Maybe I have to learn more from them. And I’m happy to learn.

Since you joined the airline, SpiceJet has been growing by 50%. Will this continue?

When I joined two-and-a-half years ago, SpiceJet had 22 aircraft, now we have 52 aircraft. This means 30 aircraft in 30 months. We used to fly 22 destinations. Now we fly 53 destinations. We have grown from 140 flights a day to 350 flights a day, an increase of 200 flights a day in two-and-a-half years. This 50% growth was hugely rapid for SpiceJet. Now, we will not be growing at that pace, but will look at 25%. We are looking at growing in a more sustainable and manageable way. We may take three or four years to double the current growth.

What has been the SpiceJet’s biggest achievement in the last two-and-a-half years?

When you think about point-to-point travel in India, you will be close to one of our 44 destinations in India. That is the biggest achievement.

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