Eyes on Dubai: SpiceJet’s turnaround

A year after grounding its fleet SpiceJet is on the eve of a huge aircraft order and mapping out plans for its internationally-based hub

Gulf News

Dubai: A year after grounding its fleet and leaving thousands of passengers stranded because it was unable to pay its bills, Indian budget carrier SpiceJet is on the eve of a huge aircraft order and mapping out plans for its internationally-based hub.

SpiceJet will place an order for 100 single-aisle jets from either Airbus or Boeing and a further 50 smaller regional type aircraft from either Brazil’s Embraer, Canada’s Bombardier or France’s ATR — a joint venture between Airbus and Finmeccanica.

The orders will be posted before March 31, 2016, Ajay Singh, Chairman and Managing Director of SpiceJet, said in Dubai last month but also touted it could be finalised this month.

Speaking to reporters in Dubai on November 29, Singh also made it clear he wants his airline carrying passengers from India to Dubai and beyond.

While many airlines already fly through Dubai using fifth freedom rights, which allow carriers to fly between foreign countries as long as the flight starts or end in its own country, Singh wants a permanent base here. Something no foreign airline has done since Kuwait budget airline Jazeera Airways was asked to leave before government-owned flydubai starting operations 2009.

“This city will be SpiceJet’s home away from home,” Singh said confidently.

But what has changed in the 12 months since December 17, 2014, when Indian state-oil companies were refusing to supply fuel to the besieged SpiceJet?

Singh, a SpiceJet co-founder who exited the airline in 2010, was not there the day the fleet was grounded. He retook control shortly after, buying out the entire 58.46 per cent stake of Indian billionaire Kalanidhi Maran and Kal Airways.

Since then, SpiceJet has benefited from reduced costs, “largely due to falling fuel prices,” John Strickland, Director of UK-based aviation advisory JLS Consulting, said by email.

“But it has also seen its average passenger revenues rise whilst seat factors have been increased to record levels,” he said.

SpiceJet has added 17 per cent capacity since December 2014, which Singh says, is from additional frequencies and increasing its fleet from 37 to 41 aircraft.

The budget carrier is now filling on average 92 per cent of seats on its flights, higher than many airlines around the world, Singh said.

And it is getting better. “In the past few days they have been in excess of 95 per cent,” he said on November 29.

Today, the airlines has halved its debt to what Singh says is now a “very comfortable” level and seen three consecutive quarters of net profit since the take over.

“We’ve put in a tremendous amount of work to try and bring the airline back on track,” he said.

On his Dubai hub ambitions, Singh said he will ask the Dubai government “sooner rather than later” to set up a base in the emirate, he says the market is “incredibly important” to his airline.

SpiceJet carriers around 100,000 passengers a year between India and Dubai, and now flies eight times a week from India to Dubai following the recent addition of flights from Kozhikode and Amritsar.

Singh said the airline now wants 15 weekly flights, including “aggressively” looking at adding Hyderabad and Jaipur.

But as Binit Somaia, Director for South Asia at CAPA — Centre for Aviation, points out, a major challenge at Dubai International “is securing slots at preferred times,” which is heavily congested at peak times.

Challenges

At home, Singh is also likely to run into challenges. India’s aviation market is congested, operating costs are high, and infrastructure and red tape makes it challenging for airlines to make money.

“The Indian low-cost market is one of opportunity and challenge. On the one hand, the market is vast and on the other, there are significant cost, infrastructure and competitive challenges,” Strickland said.

But Singh is bullish.

He argues the airline is generating enough cash now to fund the soon-to-be-made aircraft order. The airline’s shares on the Bombay Stock Exchange, Asia’s oldest, have risen nearly 300 per cent this year. “We look forward to a brighter future,” he said.

Despite the share rise, Singh is adamant “this is not the right time to be diluting the equity.” He believes there is more growth ahead.

“We feel that the [Indian] market is really immense. We think we can generate a lot of traffic within India,” Singh said.

But SpiceJet is also being courted by Gulf carriers, who, Singh says, want to buy into his airline.

“Some of the Gulf airlines have expressed an interest,” he said leading to a recent report from Indian newswire PTI that this included flydubai. The claim was, however, dismissed by the Dubai airline.

“Flydubai confirms that it is not in talks with SpiceJet,” an airline spokesperson told Gulf News recently in an emailed statement.

Regardless, Somaia said, it is “conceivable that SpiceJet may enter into a strategic alliance with a Gulf-based low cost carrier in the near term.”

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