An aviation revolution is in the air, says SpiceJet Chairman Ajay Singh
, ET Bureau|
Jan 01, 2018, 08.34 AM IST
SpiceJet expects its net worth to turn positive by March 2018 and improve from then on, chairman Ajay Singh told Mihir Mishra in an interview. He said this year will be important for the airline as it inducts new aircraft, and seaplanes can make every river a runway and every pond an airport. The airline, he said, will work towards improving profitability, adding new routes and launching flights on regional routes in a big way under the second phase of the government's Ude Desh ke Aam Nagrik (UDAN) scheme. Edited excerpts:
How was 2017 for SpiceJet?
2017 was a fantastic year for us. We placed the largest orders in the history of SpiceJet and in the history of Boeing from this part of the world. These orders found a mention by US President Donald Trump. Operationally, the company did exceedingly well in terms of load factors, which were in excess of 92% every single month of the year and our on-time performance remained among the best. Financially, every single month and quarter was profitable for us. We had more and more people fly SpiceJet and our cancellations were among the lowest. During the year, we also demonstrated an out-of-the-box solution for areas with no airports through an amphibian plane (seaplane), which shows that every river can be a runway and every pond can become an airport. That opens up the entire country to aviation and the aviation revolution can then touch every citizen of our country.
Can SpiceJet sustain this tempo in 2018?
It is going to be an important year. This is the year when deliveries of our new planes begin. New planes will reduce cost as well as improve the passenger experience. We will add about 16 planes during 2018, which will be a mix of Boeing and Bombardiers. It will be an important year as we work towards improving profitability and adding new routes, and also launch flights on regional routes in a big way, as we participate in the second phase of the UDAN scheme.
The airline's net worth continues to be in the negative even as it has been making profits ever since you took over. When do you expect this important financial benchmark to turn positive?
We inherited the airline with a large negative net worth. Since the change of ownership, every quarter has been profitable. We expect to become a company with positive net worth by the March of 2018, which will only improve from there on. The first two years of funding for the large aircraft order have already been arranged. We will induct about 35 aircraft in the first two years through sale and leaseback and may explore cheaper models for aircraft induction in the future.
What are the challenges for aviation in India?
Infrastructure is the biggest challenge. It is also partly because India is the fastest growing market in the world and the infrastructure has not been able to keep pace. A lot of other metro airports, beyond Delhi and Mumbai, have not been able to keep pace with the growth and we need to work with the government to speed up infrastructure creation. While infrastructure creation takes time, the government has done very well with the UDAN scheme, which has helped open a lot of airports in small towns that were not utilised till now. This helps as a lot of passenger growth is happening in small towns. But certainly, the capacity issue at major airports will have to be addressed on a war footing. The current constraints are also a lesson for the future and it is that we must start working on creating capacity well before it runs out.
What is the alternative to Mumbai's capacity constraints?
None of us can add flights in and out of Mumbai and that is a great pity for the city. There are small airports like Kalyan airport, which are being offered under the regional connectivity scheme. If that becomes operational, there will be some capacity around Mumbai. But realistically, Navi Mumbai is the only alternative to Mumbai and needs to be built quickly.
What would Air India divestment mean for the aviation industry?
It is a very positive move by the government, as it's very difficult to run an airline in the public sector. As someone who is involved in running an airline, I can tell you that decisions in this business have to be quick and taking decisions through a long process of committee formation and tenders does not help. No management, no matter how good, can really have a chance, as it's difficult to run an airline with the constraint of government's rules and regulations. Also, having an airline that is funded by the government, distorts the market. It is an imperfection in the market that needs to be addressed. It (divestment) will be a positive for Indian aviation. With AI divestment, you will see much more international capacity being added and also a lot of capacity (in terms of foreign flying rights), which is not being used by AI, will be utilised. I have always said that SpiceJet is too small an airline to be able to take on AI. But whosoever takes on AI, should take the brand to greater heights. I think they must retain the Air India brand because the world knows India through Air India.
How do you view the recent incident of a passenger being manhandled by airline staff?
A lot of these incidents happen because there is pressure on the system. Due to rapid growth in aviation, a lot of people are flying for the first time and are not acquainted with the rules and regulations. And since airlines are hiring at a rapid pace, perhaps they are not getting enough time to train staff with softer skills which are required, and all airlines need to do this.
How was 2017 for SpiceJet?
2017 was a fantastic year for us. We placed the largest orders in the history of SpiceJet and in the history of Boeing from this part of the world. These orders found a mention by US President Donald Trump. Operationally, the company did exceedingly well in terms of load factors, which were in excess of 92% every single month of the year and our on-time performance remained among the best. Financially, every single month and quarter was profitable for us. We had more and more people fly SpiceJet and our cancellations were among the lowest. During the year, we also demonstrated an out-of-the-box solution for areas with no airports through an amphibian plane (seaplane), which shows that every river can be a runway and every pond can become an airport. That opens up the entire country to aviation and the aviation revolution can then touch every citizen of our country.
Can SpiceJet sustain this tempo in 2018?
It is going to be an important year. This is the year when deliveries of our new planes begin. New planes will reduce cost as well as improve the passenger experience. We will add about 16 planes during 2018, which will be a mix of Boeing and Bombardiers. It will be an important year as we work towards improving profitability and adding new routes, and also launch flights on regional routes in a big way, as we participate in the second phase of the UDAN scheme.
The airline's net worth continues to be in the negative even as it has been making profits ever since you took over. When do you expect this important financial benchmark to turn positive?
We inherited the airline with a large negative net worth. Since the change of ownership, every quarter has been profitable. We expect to become a company with positive net worth by the March of 2018, which will only improve from there on. The first two years of funding for the large aircraft order have already been arranged. We will induct about 35 aircraft in the first two years through sale and leaseback and may explore cheaper models for aircraft induction in the future.
What are the challenges for aviation in India?
Infrastructure is the biggest challenge. It is also partly because India is the fastest growing market in the world and the infrastructure has not been able to keep pace. A lot of other metro airports, beyond Delhi and Mumbai, have not been able to keep pace with the growth and we need to work with the government to speed up infrastructure creation. While infrastructure creation takes time, the government has done very well with the UDAN scheme, which has helped open a lot of airports in small towns that were not utilised till now. This helps as a lot of passenger growth is happening in small towns. But certainly, the capacity issue at major airports will have to be addressed on a war footing. The current constraints are also a lesson for the future and it is that we must start working on creating capacity well before it runs out.
What is the alternative to Mumbai's capacity constraints?
None of us can add flights in and out of Mumbai and that is a great pity for the city. There are small airports like Kalyan airport, which are being offered under the regional connectivity scheme. If that becomes operational, there will be some capacity around Mumbai. But realistically, Navi Mumbai is the only alternative to Mumbai and needs to be built quickly.
What would Air India divestment mean for the aviation industry?
It is a very positive move by the government, as it's very difficult to run an airline in the public sector. As someone who is involved in running an airline, I can tell you that decisions in this business have to be quick and taking decisions through a long process of committee formation and tenders does not help. No management, no matter how good, can really have a chance, as it's difficult to run an airline with the constraint of government's rules and regulations. Also, having an airline that is funded by the government, distorts the market. It is an imperfection in the market that needs to be addressed. It (divestment) will be a positive for Indian aviation. With AI divestment, you will see much more international capacity being added and also a lot of capacity (in terms of foreign flying rights), which is not being used by AI, will be utilised. I have always said that SpiceJet is too small an airline to be able to take on AI. But whosoever takes on AI, should take the brand to greater heights. I think they must retain the Air India brand because the world knows India through Air India.
How do you view the recent incident of a passenger being manhandled by airline staff?
A lot of these incidents happen because there is pressure on the system. Due to rapid growth in aviation, a lot of people are flying for the first time and are not acquainted with the rules and regulations. And since airlines are hiring at a rapid pace, perhaps they are not getting enough time to train staff with softer skills which are required, and all airlines need to do this.
