Following a reasonably better 2010-11 private airline industry is yet again faced with financial woes. The sector?s growth is at stake with companies reporting losses in spite of growth in air traffic. One of the key players in the domestic market, low-cost carrier SpiceJet is also struggling to make money in the adverse operating environment marred by rising input cost and irrational product pricing. The company?s CEO Neil Mills spoke exclusively to Vishakha Talreja & Nirbhay Kumar of the FE on issues concerning the airline and its growth plans. Excerpts:
This financial year did not start on good note. Do you expect the July-September quarter to be better?
The third quarter of this calender has not been good for us or any player. The irrational pricing of one player has brought airfares down. Some carriers continue to price their tickets below the cost. And now the rupee depreciation is also showing its impact on the financials. So irrational pricing, exchange rate and fuel price have had an adverse impact on the results.
Will low tariffs have an impact on airline books in the on-going quarter too?
One leading airline (read Air India) is offering around 15-50% discount on every ticket. On some of the metro routes the airline?s pricing is below the fuel price. The carrier is dragging all the other airlines in it. This is risking the financial viability of the industry. Because all the carriers have almost similar market share, between 14% and 26%, none of us are big enough to push the prices up but all of us are big enough to push prices down. For 12 years when I was working for EasyJet, I competed with RyanAir, so I am not against competition. Competition is a good thing as long as there is financial accountability.
With Kingfisher Airlines deciding to exit the low-cost space do other budget carriers stand to gain?
I can?t say if it?s good or bad for us. But, yes, India is a price conscious market. Everybody wants a good deal. The premium products will always have a market, but that market in India is not very big. On an average a flight is for an hour and a half, nobody wants to pay three times the price for an hour and a half flight. I think going forward low-cost products in every industry will work well.
There were also talks of re-branding the airline after Kalanithi Maran bought stake? Also, will you enter the full-service space?
No, there won?t be any kind of re-branding. We have a strong brand and part of the asset that Kalanithi Maran bought was the brand. Why will he change what he paid for? It doesn?t make sense.
You recently launched your regional operations with the Q400. How has the response been?
The Q400 jets are doing 40 flights a day already. We are happy with the response. The load factors have been above 90% for the last two weeks. We have already managed to stimulate demand and on a couple of flights we are making money.
Looking at your fleet type it looks that you wont operate long haul routes. Is it so?
With the current fleet we can fly to destinations within six hours. Around 3.5 billion people live in that range, which is enough for our expansion plans as of now. We have applied for 10 new international destinations but at the moment it is only a wish-list, we still haven?t got any response.
IndiGo and SpiceJet once had similar market share but today IndiGo has a market share of 18.7% against your?s 13.4%.
SpiceJet got into management and shareholder churn. We also ended up with a split board, and when we couldn?t get consensus on anything. That means nothing moved in the company and we did not grow for around two years. Meanwhile, our competition continued growing during that period. But now we are trying to make up for the lost time. We will be adding eight more planes by the end of this financial year. We have added eight airplanes since October last year. And to add here as I have always mentioned, market share as an indicator is not very important. I can?t pay salaries or fuel bills with the market share.