SpiceJet is one of the leading low-cost airlines in the country right now; however, this was not always the case. Ajay Singh, the managing director and CEO of the airlines talks to AIBM about the turnaround the airlines took to reach its true potential today.
Looking back at the time when SpiceJet was almost dead, what made you come back to it?
How confident were you then that it will be where it is today? I came back because there was a real opportunity in the aviation space. Very few Indians were flying yet and SpiceJet was a brand known across the country. At that time, it was well loved for the most part except the last few months when there was a lot of trouble. It was a brand that was really associated with me. Hence, its disappearance would reflect poorly on me even if I wasn’t the in-charge of the company. It was a rational decision. There was an opportunity and a known brand. As a company I knew it pretty well. I knew the people working in the company and the potential of the company. From that perspective I thought it was a sensible thing. And as you know things have gone quite well in the past two years.
What are the two-three big factors that have helped you manage the turnaround?
Firstly, culture was an important issue, more specifically, to get people focused on a consumer centric culture was important – a culture that looks at profit, cost reduction, and revenue increase as primary objectives. These things were sort of lost along the way. Secondly, all of us worked very hard in insuring that the operating performance of the airline improves. From the time I took over, there were huge number of flight cancellations and the on-time performance was less than 40 pc. Unless the flights are reliable, people are never going to fly. If people believe that the airline is not going to be there three months later, then of course nobody will buy advance tickets. So the first thing was to revive the confidence in the travelling public that the airline would be there and the flights will fly on time. We worked hard on reducing cost as well. Many areas had huge costs. There was renegotiation of many contracts. Much of the finance cost, the engineering cost and airport cost were way too high. So we worked on a lot of cost numbers. We worked aggressively on network redesign, focusing on the more profitable routes and increasing passenger yield, which was so much lower than our competitors at that time. We improved the ancillary part of the service, the seat selections, meals, etc. All of that has shown great results.
You have recently placed a large order for Boeing. How do you see that getting deployed? What’s the timeframe? What’s your objective for the next four to five years?
We have placed firm orders for 155 aircraft and 50 purchase rights. That is 205 aircraft and this order helps us reduce the cost further. It helps us reduce maintenance cost, because we renegotiated the contracts. It also reduces acquisition cost of the aircraft. This is a new generation of aircrafts, which will reduce the fuel burn as well. Its’ something we needed to do to get surety on our expansion plan as well as cost reduction. We have a situation where the company has performed very well in the last two years. We have had eight profitable quarters. We’ve now had 21 continuous months of our load factor in excess of 92 pc, which is some sort of world record. No airline in the world has ever achieved that. Plus, we have the best on-time performance in the country for the last several months. We want to build on all these positives, hence this order. They will start delivering in 2018. It will be fully delivered by 2024.
How big do you think SpiceJet will be in 2020?
We’ll see. We don’t have any real targets. We want to grow profitably. We are not in this for market share; we are in this for making money. We have been profitable for the last eight quarters and we’ll keep that up. So we’ll add the aircraft as and when we need. Of course this order will start to come in from 2018, so capacity will be added. But we want to do it in a profitable way. If there is opportunity over and above these orders for us to get aircrafts at a more reasonable cost, we are happy to explore the possibilities.
How is the aviation policy and government’s handling of it? Would you ask for anything more?
The government is quite engaged in the aviation business and that is good. Obviously we need to look at the bigger picture. As a country we need to develop a strategy to be the aviation superpower in the world and to create our own international airports, which can become international hubs. We also need to create global airlines. This is what we need to work towards and we are working actively with the government to follow that.
Is there something more you want in terms of facilitation?
For sure, we need to bring down the cost of aviation. In 1.3 billion people we have only 30 million flying and that’s a pity. The way it will go up is if you reduce the cost of aviation. We have the most expensive aviation turbine fuel and airports. We need to bring the cost down and the government policy needs to help in doing that. We also need to create many more airports to foster this growth. With 24 pc growth annually, we are the fastest growing aviation sector in the world today. We need to plan for that growth and make sure there is enough infrastructure. The government will have to help in all this. Basically the government has to help in aligning a policy with what happens globally.
What about your overseas plans? What’s a good mix between domestic and overseas flights?
We are flying to five countries. Twentyfive pc of our capacity is international. We are looking to increase that. We have 10 flights a day to Dubai. We have flights to Muscat, Bangkok, Colombo, Malay, Kabul and Dhaka. Shortly we’ll fly to Sharjah.
No long-hauls for you?
Not right now, but we will study the possibility of a low-cost long-haul at some time in the future.