We’ll be in a different position by the year-end

Apr 09 2014, 03:32 IST
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SummaryWith a new management in charge, the country’s third-largest airline SpiceJet is busy scripting a turnaround. But while the management is aggressive

With a new management in charge, the country’s third-largest airline SpiceJet is busy scripting a turnaround. But while the management is aggressive, the airline has seen its share of troubles—brand-building activities like a super sale offer at R1 and a dance by crew on board a flight on the occasion of Holi have seen it receive warnings from the aviation regulator. In an interview with FE’s Roudra Bhattacharya, Sanjiv Kapoor, SpiceJet’s new COO and an ex-consultant with Bain & Company, explains how the new strategy of better inventory management and a revamped network has to be aligned as per the business models followed by low-cost carriers (LCCs) globally. Excerpts:

Your super sale offer has created quite a stir in the market…

In India, a super sale offer may be termed as a fare war but, in reality, it is standard practice—after all, it makes no sense to fly empty seats. In fact, it’s not a price war, it’s market stimulation. We need to get more people flying in a manner that doesn’t dilute your overall unit revenue. On an average, airlines in India are flying 20-30% empty seats, so our strategy is to fly fewer empty seats and generate incremental revenue.

What is your primary focus?

We are focused on both revenue and cost management. In revenue management, Indian carriers have been conservative and have not done much, including us. But with the new thinking that has come into SpiceJet, with the world-class experience of LCCs and full-service carriers that we have, we will bring what are the standard revenue and inventory management practices.

Profitability has been elusive. When do you expect to breakeven?

It was a tough year for the industry and we are no exception. In how many industries do you see that 70% of your costs are dollar-denominated and this bucket takes a 25% hit due to exchange rates? This is brutal. But we have a new management and a plan to turnaround. Airlines are like ocean liners, you can’t turn them around instantly. The promoters have been supportive and have told us to do what is required, and then the board is there to oversee. They have pumped up the equity from 38% to 58%. They will give us whatever time is required and we are not talking five years but a much shorter period. Airline turnarounds that I have seen as a consultant with Bain & Company take about a year.

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