With funding in place, sky is the limit, says SpiceJet COO

Sun Group-owned SpiceJet, which was in the woods, is now on a recovery path.

 The perception about the airline has changed, believes Sanjiv Kapoor, the Chief Operating Officer of SpiceJet. Kapoor, who has over 17 years of experience in the industry, responded to the questions of Deccan Herald's Shemin Joy. Excerpts:
SpiceJet was in the woods for the past some years. Can you now confidently say that the airline is returning to safe zone?

We made an operating profit in Q1 FY15. We are now the No 2 airline in the country in terms of domestic market share. The branding, positioning, and perception of SpiceJet has transformed over the course of the year, and from flying aircraft with the lowest loads (occupancy) one year ago, we are now in the position of having flown the fullest aircraft in the last 4 months.

 This has not been at the cost of yield. Our Revenue per Available Seat-Kilometre (RASK, the product of load factor and yield) has improved – the most important revenue measure, is up. Average revenue per flight has gone up, operating costs have been reduced, and customer service transformed.

SpiceJet now is the market maker with its innovative fares and offers, and is a market shaker as well with other innovations such as our new and enhanced menu, weekend uniforms, surprise birthday card distributions and celebrations on board, vibrant celebrations during major festivals such as Holi, Diwali, and during regional festivals such as Durga Puja. We have brought warmth, colour, passion, and a sense of joy back to the Indian aviation landscape, delivered to you each day.

On an operational basis, the metrics are all pointed in the right direction. Once funding is in place to take care of past accumulated losses, we will have transformed the airline.

The airline launched a series of discount sales. Were you confident this strategy would pay you rich dividends?

SpiceJet has been the pioneer in providing discounted air tickets in the Indian aviation industry. SpiceJet and its pricing stimulation initiatives that shook up the industry in a positive direction, passengers travelling by air grew 28 per cent in September 2014 relative to September 2013, benefitting not just customers grabbing cheap fares, but also the larger economy.

Research has shown that for every dollar spent on air travel, 12 dollars is pumped into the economy overall, thanks to the “multiplier effect”. Airports, travel agents, hotels, and local businesses have all benefitted from the increase in air travel, with never-before seen volumes even in low season.  I do not think it would be far-fetched to refer to this as the “SpiceJet Effect”.

Aviation analysts feel that airlines would not be able to sustain such discounts at a time when most of them were in loss.

We have clarified our view on several occasions. Analysts need to understand the concept of RASK, of average vs marginal revenue, and how these offers improve total revenue per aircraft as we fly fewer empty seats. The data is public, RASK is significantly up. Not every seat is priced at a discount, only those seats that we believe would otherwise go empty. If you price every seat a discount (as many analysts seem to assume), then obviously it will make losses worse. Inventory management is key. Low cost carriers across the globe come out with such offers and they are a fundamental part of the LCC business model.

What are the areas that you feel that SpiceJet needs to improve, customer wise as well as company’s financial health wise?The transformation process is still underway.  We are working to continuously improve all aspects of the business.

What are the new products you are going to offer in the coming days?

SpiceJet’s new approach includes creating much warmer, friendlier, more natural ambience for its customers onboard. Soft rock boarding and landing music, new cabin headrest colours, revamped menu, the “With All Our Heart” tagline and symbol, are examples of this.

In past one year, we have launched a number of new products and some of them are industry first. We are the first airline in the world to put our staffs’ pictures as aircraft livery. We are the first airline in the country to introduce weekend uniform for our crewmembers. Crewmembers love it. Customers like it.

It differentiates us.SpiceMAX is another effort to offer better flying experience to passengers, who can enjoy more space for a nominal extra fee. This has been a huge success. We launched SME product dedicated for MSME sector and response to all these efforts have been positive. We have emerged an innovator in the aviation sector and will continue to innovate and bring in the difference.

Winter is coming. The festive season is on. What can the customers expect from SpiceJet?

Customers will just have to wait and see.
Questions are being raised about the control/ownership of airlines post FDI. There are allegations that the control of some of the new players rests with foreigners. How do you see this?

No comment

The oldies of Indian aviation sector are accused of ganging up against the newbies. What is your reaction?We are not ganging up against anyone.

Why there is so much animosity with new entrants?

You had a twitter war with some of them.It was not a war. It is our response to claims made by others. For too long the claims on Twitter had been one sided, now we decided to give our POV too, that’s all.

The government has given its green signal for another around half-a-dozen players. Do you see enough space in the market for the new players?Overcapacity is certainly a concern.

Where do you see SpiceJet in next five years?

Once funding is in place, the sky is literally the limit. The continuous growth in our load factors and improvements in RASK makes me believe that. Also with the rising affluent middle class, I see more people choosing air as preferred travel mode and with its LCC business model, SpiceJet will be in better position to tap that opportunity.