How SpiceJet has managed to turnaround its fortunes

By: | Updated: December 10, 2015 2:59 PM

SpiceJet, which has now reported profits in last three quarters, has made its operations more efficient and is focussed on improving the load factor.

Spicejet Spicejet, which has now reported profits in last three quarters, has made its operations more efficient and is focussed on improving the load factor by effective pricing and inventory management on routes where it generates maximum revenues.

No frills carrier SpiceJet  has managed to turn around it fortunes by implementing effective cost reduction methods. The airline, which has now reported profits in last three quarters, has made its operations more efficient and is focussed on improving the load factor by effective pricing and inventory management on routes where it generates maximum revenues. “The company expects  that the current growth of around 20% witnessed in the domestic market shall continue for the next eight to twelve months and thereafter will stabilise at around 10-12%,” SpiceJet’s annual report noted.

ALSO READ: SpiceJet shares soar 339 per cent in a year, should you invest?

Data from Director General of Civil Aviation (DGCA) shows SpiceJet’s passenger load factor (PLF) stood at 92% in October while its market share improved to 12.8%. The low cost airline also carried 8.99 lakh passengers during the month.

During the winter the airline will look to operate 291 flights across the country in order to attract tourists. In October the airline announced that it will add 6 new aircraft to its fleet. Currently, Spice Jet operates in 42 cities.

As a part of its expansion drive the airline opened new routes from cities like Varanasi and increased frequency to places in north east like Agartala. SpiceJet plans to order 100-150 aircraft and is in talks with the major aircraft manufacturers like Airbus and Boeing in order to expand its existing fleet of aircraft.

The troubled airline has also implemented a fuel management programme which has resulted in better fuel efficiency compared to the last financial year despite the increased passengers and cargo, the company said in its annual report.

As part of its revenue generating measures, the airline took charge of its cargo, catering and reservation services; it was earlier outsourcing these to a third party.

The airline also endeavored to enhance the yield by emphasizing on a collection of factors like, increased close in pricing, optimized customer mix, innovative fare structures and increased presence in the international space.

“Company has increased aircraft utilisation and are clocking the best in fleet category utilisation across the world. This has helped us produce more seat kilometres over the existing resource base and as accelerated the fixed cost absorption,” SpiceJet said in the annual report.

The revival plan envisages an increase productivity by 10% and renegotiated contracts for maintenance from service providers.

SpiceJet is in the process of implementing other cost reduction initiatives, the most significant being the cost of acquisition on revenue generating assets.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition