SpiceJet: In Need of Another Turnaround

The stock value of SpiceJet airline had dropped to Rs 35.25 post the announcement of lockdown, it plummeted back to a high of 106.15 during the year-end in 2020. The airline sector is seeing hope again with the vaccine roll-out anticipation. The remarkable story of SpiceJet from rags to riches further gives us hope that the airline can emerge well above the covid led steep fall.

Also Read: Ask The Expert: Why is Spicejet in a Hand-to-Mouth Situation?

SpiceJet

The remarkable turnaround story of SpiceJet

Indian entrepreneur Ajay Singh acquired the Modiluft company in 2005, and from there we see the inception of SpiceJet. Since then the airline has seen many ups and downs. The biggest low came in 2014 when the airline was close to shutting shop. The share prices fell as low as Rs 15 apiece. There was mass chaos at airports with most of the SpiceJet flights getting canceled and stranded passengers getting all violent. Panic had spread even to the Parliament. Then came the original founder Ajay Singh who repurchased the bleeding airline and brought about a remarkable turnaround. ‘

The company reduced operational efficiency by maintaining the airline altitude and speed in such a way that fuel efficiency is increased. It made sure that the airline does not follow dirt-cheap fare sales to stay viable anymore. It made sure that the flights reach on-time and the airline comes out of its ‘never on time’ reputation. The airline launched a new advertising campaign to restore customer confidence. What also aided them greatly was a steep fall in crude oil prices and on-time government support.

What is it that makes SpiceJet stand out today?

Post its turnaround in 2015, SpiceJet has tried to remain a market differentiator. It goes by the strategy of never follow the crowd. Stand apart. 

The airline never follows a very crowded route and instead tries to start a new one. SpiceJet, therefore, follows point-to-point connectivity rather than going by the hub and spoke model.

SpiceJet

When you are the only one operating on the route, you own the liberty to schedule and price the flight as per your terms. Coincidentally, the 2017 government scheme called UDAN (‘Ude Desh ka Aam Nagrik’) promoted several unexplored routes with subsidies. After having recognized several such profit-making unexplored routes already, SpiceJet roped in the subsidy benefits too. 

The ‘WET lease’ scheme of SpiceJet is another feather lending them differentiating color. While most other airline carriers own the plane or go by the ‘dry lease’ model, SpiceJet follows the ‘wet lease’ scheme. This means that SpiceJet neither owns the planes, nor the crew. It just leases them for a short time period, thus saving on the maintenance costs of old aircraft. It just gives a touch-up and its color to its fleet, puts on its red, hot, and spicy boards everywhere, and that is what gives it a distinct identity. 

Despite being a Low-Cost Carrier, SpiceJet came out with its own in-flight entertainment service called SpiceEngage in 2018. This add-on in a low-cost carrier definitely attracted the people towards SpiceJet. The competitors also had come up with their own in-flight entertainment systems post this.

Overcapacity is an oft-quoted problem in the aviation industry. Whenever a new opportunity is spotted, all the few players rush to fill in the gap. This quickly exceeds the supply over the demand. Now either the prices have to be reduced or operations shut. It’s important to realize when to pull-out of such loss-making routes. SpiceJet is very swift in such actions. This helps the airline to avoid unnecessary losses.

SpiceJet maintains a very high load factor or occupancy rate in layman terms. It means that the airline flies at its almost full capacity usually. This is despite flying on unconventional routes. This is possible with the intelligent placement of their Q400 aircraft which have a smaller seating capacity. This high usage of regional jets makes sure that the flight remains full even in unconventional routes. In May 2019, the load factor of SpiceJet stood at 94%! This definitely saves a bigtime on the operational costs.

The hope ahead

Today with the COVID-led crisis, SpiceJet is almost back to a new turmoil. The size of the airline today is almost three times its 2014 size. This means that with bigger employees and complex operations, the problems have multiplied too.

SpiceJet

But with a history of a remarkable turnaround, the hopes are high that the airline would quickly emerge out of the current COVID-led crisis. 

Also Read: SpiceJet 737 Max 8 diverts after engine fault mid-flight

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