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SpiceJet flights to profit
By:
Ishit Bhatt (M83),
Prayag Chauhan (M87),
Ram Chaudhary (M99)
The Strategist
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Agenda
` Product
` Market Share
` Last Fiscal Growth
` Expansion Plans
` Improvements
` Competition
` A move towards vision
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Overview ofAirline Industry
` Few number of firms contributing to majority of market share
` Products are differentiated upon service quality
` Respective firm set respective price
` 40% of Indias exports and imports are carried out by air
` Low price carriers already introduced
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` In 2005 Licenses were issued to 19 new carriers
` 5 new carriers were launched in 2005 with remaining slated tocommence in 2006
Overview ofAirline Industry
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SpiceJet Overlook
` A low-cost airlines based in New Delhi
` Began services in May 2005
` Earlier know as Royal Airways
` Entered with Rs 99* for the first 99 days/9k seats
` Followed by Rs 999* promotional schemes on selected routes
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website
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Current fleet and Operations
` 115 daily flights with a fleet of19 next generation Boeing 737s
` 150 Indian pilots, and 50 expatriates (35 full time)
` The fleet strength is completely utilized
` Further route expansion has been ruled
out till new aircrafts are included
14 737-800s5 737-900ERs (Extended Ranges)
Source: http://www.business-standard.com/india/news/spicejet%5Cs-flight-to-profit/399554/
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Achievements
` By 2008, it was Indias second largest low-cost airline in termsof market share
` Market share to 11.8% in January 2008
`How SpiceJet achieved this?
Source: http://www.business-standard.com/india/news/spicejet%5Cs-flight-to-profit/399554/
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Adjusting to Global Meltdown
` Competitors were struggling, on other part SpiceJet wasfocusing on profitability from this consolidation wave
` Focus towards enhancing the customer experience
` Global slowdown in air travel impacted leisure segment andmade SpiceJet accelerate its increasing focus on business
passenger
Source: http://www.business-standard.com/india/news/spicejet%5Cs-flight-to-profit/399554/
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Secret behind SpiceJet s success
` I did not feel like eating it Sanjay Aggarawal
` Other facilities like food, beverages, leg space comfort, seatcomfort, on board facilities and many more
` Food sales do not contribute to revenues just about 1.5% -but decent on-board menu ensures significant rise
` turnover in 2009-10, the only listed company to make profitfor the financial year
Source: http://www.business-standard.com/india/news/spicejet%5Cs-flight-to-profit/399554/
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Advertisement
Hot Indian Meals SpiceJet Airlines.flv
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Facts and Figures
` Profit of Rs 61.4 crore against loss of Rs 353.2 crore (inprevious year)
` Two reasons for the above statistics
` One, barring one quarter, SpiceJet made a profit in everyquarter last year
(Note: The losses in the July-September quarter were on
account of fare cuts in response to similar moves by JetAirways and Air India which were trying to win backcustomers after they faced strikes).
Source: http://www.business-standard.com/india/news/spicejet%5Cs-flight-to-profit/399554/
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Facts and Figures
` Two, SpiceJet's concentrated on low-cost fare structure that gave itan advantage as the aviation industry grew 16% to 89.36 millionpassengers
` SpiceJet also managed to grow its market share 20 per cent,
from 10.3 per cent last year to 12.4 per cent, without addingcapacity.
` Its flight back to profit was, in fact, as much a result of higherspending as of cutbacks.
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Market Share
Source: http://www.google.co.in/imghp?hl=en&tab=wi
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Revenue Share
Source: http://www.google.co.in/imghp?hl=en&tab=wi
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Sweating the assets
` Last fiscal passenger traffic 44%, more than double theindustry average
` This was because sweating its assets more than usual by
increasing aircraft utilization
` Focused on ground-handling and refueling times, and re-jigging
airline schedules, it utilized aircraft to 12.5 hrs./day from 10.5
hrs.(Kingfishers 9.5 hrs., Jet 10.5 hrs., Air India 8.5 hrs.)
Source: http://www.business-standard.com/india/news/spicejet%5Cs-flight-to-profit/399554/
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Sweating the assets
` Cut expenditure but not where it would harm the product(E.g.: 20 aircrafts are washed every 3 days against once a
week)
` International operations because it only grew 8.8%
` But Mr. Aggarwal thinks its beneficial
(E.g.: A Delhi-Chennai flight can add on passengers to Sri-
Lanka)` Tuff competition ahead as it is planning to enter International
market(International operations accounts 59% of revenue forJet)
Source: http://www.business-standard.com/india/news/spicejet%5Cs-flight-to-profit/399554/
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Source: http://www.google.co.in/imghp?hl=en&tab=wi
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Besides all above Strategies
` Smart Flying Ascent and descent of pilots
` Cost/seat/km = 2.30, while other competitors have 60%more
` Freezing salaries, curtailing non-essential expenditure
` Landing cost,
` Payment (15% disc)
` 14% Cutback in
airport & aviation
charges
Diligent cost management
Source: http://www.business-standard.com/india/news/spicejet%5Cs-flight-to-profit/399554/
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Latest News
` SpiceJet posts profit of 10 cr. Q2 and 11.4 cr. Q1(November 2, 2010)
` September 30, 2009 101 cr.
` September 30, 2010 10 cr.
` Operational
` 16 % growth in number of passengers.
` 14 % growth of Available Seat Kilometers.` 15 % growth in number of departures
Source: http://www.spicejet.com/newspage.asp?strNews=NewFlgtQTFY11
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Latest News
` Financial` 40% increase in Revenue from Operations.
` 22% increase in Revenue per Available seat Kilometer.
` 9 % reduction in Non-Fuel Cost per Available SeatKilometer.
` Net Profit of 10.1 cr. compared to a Net Loss of ` 101.3 cr.
Source: http://www.spicejet.com/newspage.asp?strNews=NewFlgtQTFY11
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Future Plans
` Between 2010 and 2012, SpiceJet will induct 12 Boeing 737-800s & 747 into its fleet, at the rate of 4 aircraft every year
` With a capacity of 300 tons per day, SpiceJet has also targeted
a doubling of cargo revenue to five per cent of total revenue.
` 30 Aircrafts have already been ordered to Boeing
` Soon going to start international routes
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Personal Experience
` Nilesh Desai, Dolphin Travels, Kankaria
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