Industry observers point to Vistara, which had got similar designations done over a year ago, but is yet to start flights to the US and the UK
By any measure, the development is a significant one. SpiceJet has now got rights to operate flights to the US and the UK, among the two busiest destinations out of India.
Approval for the UK destinations came on July 24, a day after SpiceJet got designated for the US. With this, the airline has presumably taken an early lead among its private peers, especially IndiGo and Vistara, who are also eager to fly to these two countries.
At present, Air India is the only Indian airline operating flights to these markets. No private airline, since Jet Airways got grounded in April last year, has flown to these long haul destinations.
Industry observers, however, pointed out many questions that remain unanswered. Most crucial of which is this: What after getting designated; what is the next step for SpiceJet?
Significant development
The US and the UK are two countries with big Indian diaspora. Destinations such as New York and London have the heaviest traffic on flights from India.
Even for the Vande Bharat Mission flights, Civil Aviation Minister Hardeep Singh Puri had underlined that the US and London routes are the busiest.
In an earlier story in Moneycontrol, it emerged that Air India was making about Rs 2 crore from each of its flight to San Francisco, from Delhi. Since then United has started operations from India - after this controversy - and Air India itself has slashed fares by 25 percent. Despite the fare cuts and increased supply, these are routes good for business.
Though SpiceJet, and rest of its private peers, have begun operating repatriation flights to destinations in the Middle -East and the South-East, they also would be eager to get a piece of the other pies, which are Europe and North America.
Important to shore up revenues
Financially, it is important as all the airline are trying to cut costs, and generate as much cash as possible amid the COVID-19 disruption. IndiGo CEO Ronojoy Dutta even shared the grim possibility of the country's largest airline not making profits this financial year.
While IndiGo is laying off 10 percent of its employees, all other airlines, including SpiceJet, have sharply cut pays and have sent employees on leave without pay.
It is difficult to ascertain SpiceJet's financial condition. The airline is yet to announce its finances for the fourth quarter of last year. In comparison, IndiGo, which reported losses of Rs 870 crore in Q4 of last FY, will announce its first quarter results on July 29.
For its last published results, SpiceJet had reported a 21 percent jump in profits for the quarter ending December 31. While it hadn't disclosed its cash balance for the third quarter, it had Rs 86 crore, as of September 2019. IndiGo, on the other hand, said it has free cash of Rs 8,928 crore, as on March 2020.
The news on flying approvals for the US and the UK, have helped SpiceJet stock, which has risen for the second consecutive day. The stock was up around 3 percent at the time of writing the story, even though the broader markets were down.
What's a designation, and didn't Vistara already have it?
That's correct.
First, the designation part. After signing bilateral agreements with other countries that allow air operations, each country then has to decide which airline can start operating on these routes.
Here is the important part.
Vistara was 'designated' both for the US and the UK a year ago. But it still hasn't started operations. And it's the only private airline in the country that has an aircraft- a Boeing 787-9 - that can fly to the US and the UK. Neither IndiGo nor SpiceJet has an equivalent aircraft in their fleet.
So getting designated is merely the first step to what can otherwise be a lengthy regulatory process. It will depend on the kind of approval an airline seeks. These could be for code-fare, wet lease operational approvals or for their own aircraft.
What aircraft will SpiceJet use?
The airline hasn't given any indication. But there is a constant buzz about the carrier having taken A330 aircraft from Oman on wet-lease. A wet-lease is when the lessee is also provided with the crew, insurance and maintenance, along with the leased plane.
While the A330 would need a fuel stop to be able to reach the US, Oman Air also has the Boeing 787-9 Dreamliner that can fly to American cities, from India. Will SpiceJet get a Dreamliner? Let's keep an eye.
Does it mean SpiceJet may not fly to the US anytime soon?
It very well could. Under the Vande Bharat Mission. And not just SpiceJet, but IndiGo and Vistara may also add destinations in Europe and North America for their repatriation flights.