Even as the airline looks for new investors to bring about a turnaround, a negative brand image could play spoilsport
Even as the Kalanithi Maran-owned airline SpiceJet hopes for fresh funds from investors to turn around the company, frequent flight cancellations and delays are making consumers wary. In an intensely competitive aviation market like India where multiple carriers are vying for a share of passenger traffic, often through predatory pricing, SpiceJet may find it difficult to regain its feet if the brand comes to be associated with uncertainty in the minds of travellers.
A person who works closely with SpiceJet said it hadn’t paid its vendors, contractors and employees for one to three months. He declined to be identified. “We haven’t been paid for three months now,” he said.
According to news reports, the number of flights on SpiceJet’s network that are getting cancelled at present stand at around 70 per day, up from around 40 in mid-November. SpiceJet had said in November that it had cut the size of its fleet by 10 planes to 38 over the last few months. Since January, SpiceJet has rolled out multiple discount schemes to attract passengers and the strategy has worked.
In October, SpiceJet recorded a passenger load factor of 80.1%, the second highest in the industry after Air India. But the passenger load factor might suffer in the coming months if delays and cancellations of flights continue.
The carrier reported its fifth straight quarter of losses for the July-September period, though it managed to narrow losses to R310 crore, from R559 crore a year earlier. Its revenues rose 15% over the year earlier to R1,450 crore.
The recent decline in jet fuel prices is likely to help SpiceJet. SpiceJet’s COO Sanjiv Kapoor had told FE on November 27 that the drop in jet fuel prices could help the airline save R320 crore in 2014-15. “If the states reduce the value added tax on ATF—as has been proposed—jet fuel prices would drop a further 3-4% in December, and the airline’s savings could be over R600 crore,” he had said.
On November 24, the carrier said in a statement to the bourses that a few investors have evinced interest in making an investment in the company. “Since the deliberations with such prospective investors are at an exploratory and preliminary stage it will be improper to comment on the specifics of any possible stake sale or the valuation of the company at this stage,” it added.
On November 29, billionaire investor Rakesh Jhunjhunwala acquired a 1.4% stake in SpiceJet for R13.41 crore. Jhunjhunwala told a television channel on December 3 that he bought SpiceJet’s shares since trading on Jet Airways’ shares was frozen on that day and indicated that he wasn’t a long term investor in SpiceJet.