Government should have holistic view on Aviation Sector; It should bring policies at par with Aviation nations: Ajay Singh, SpiceJet
Ajay Singh, Chairman and Managing Director (CMD), SpiceJet, said that we are a low-cost airline and too small to take over and turnaround Jet Airways, which needs a deep-pocketed investor, in an interview with Zee Business.
Ajay Singh, Chairman and Managing Director (CMD), SpiceJet, has said that we are a low-cost airline and too small to take over and turnaround Jet Airways, which needs a deep-pocketed investor. In an interview with Swati Khandelwal, Zee Business, Singh also said that SpiceJet is trying to hire best employees, including pilots, cabin crew and engineers, from Jet Airways that has suspended its operations. Edited Excerpts:
Q: Jet Airways is a big question at present, but I would like to know that have you ever considered or will consider it in the recent future?
A: The first thing is that whatever is happening with Jet Airways, an iconic airline that has served the country for 25years, is very sad. In fact, the way it has closed is a matter of great sadness and concern for both airline companies as well as the government. There is something at the policy level that is not allowing us to function properly. If a major airline stops functioning in every five years, then there are some problems which should be resolved in a systematic manner and repeatedly, we have said this to the government. It is a time when the government should have a holistic view of the sector and try to pull out the fault areas that exist in it. In fact, they should benchmark our policies with the policies of the aviation nations because in future the Indian airline companies will not only be competing with each other’s but will also compete with the global airlines. The aviation business is a global business and that’s why we can’t have a different policy and cost structures.
Q: Taking your point, I would like to know about that something that keeps other companies including yours afloat in the same environment, but Kingfisher and Jet Airlines failed to do so, and the government may raise a question on your existence in the same situation?
A: See, there is a difference between existence and have a strong presence. SpiceJet is a low-cost airline and our unit cost is also low when compared to the cost of Kingfisher and Jet Airways. However, the fares at which they, Jet Airways and Kingfisher, were selling the tickets, were almost the same as us but they were running at a higher cost. This means they were incurring losses when compared to us. Thus, increased losses and deteriorated external environment like increase in fuel cost and currency depreciation have a huge impact on them. Repetition and longevity of these factors create a big problem and currently, it is happening in the industry. But, strong inherent demand and growth rate of the aviation sector is providing us with an opportunity and we must take advantage of the same. In fact, we, India’s aviation sector, is the fastest growing aviation market in the world and we must reap the benefits of the same. It can be done by correcting our cost and have an agenda to make our airlines global.
Q: Whatever has happened with Jet Airways is sad news, but don’t you think that SpiceJet has an opportunity to grow and acquire Jet, at least when you have been known as a turnaround specialist.
A: Yes, we had an opportunity and many people, almost every stakeholder, came to me and asked to look into it. We did it and looked onto it and its numbers to create an opportunity but after analysis we felt that we are a small airline and we can’t handle the scale of problems and scale of liabilities that exists with Jet Airways.
Q: But, the bankers have refuted your comment that Jet’s total liabilities stand around Rs25,000 crore by saying that it is a wrong figure.
A: See, we have studied things and saw each number and I can only say that the bankers possibly would haven’t gone for the same diligence as we did.
Q: Thus, it is out of the question that you can acquire Jet Airways?
A: See, we can’t do it as SpiceJet is a small airline company and one acquiring it must have deep pockets. But, we hope and wish that Jet Airways flies once again.
Q: You have shown interest in their routes, aircraft and employees and have also acquired few aircraft and willing to acquire more. So, let us know the kind of acquisition that will be made on this part?
A: Currently, taking care of the consumers' interest is an important thing as fares have skyrocketed and several areas and cities have disappeared from the aviation map of India. There is a huge demand and supply mismatch at present and other airlines have the obligation to place more capacities in the system and normalise it, which can be met only by matching this demand-supply mismatch. In fact, the government has requested airline companies to put maximum capacity, as far as Spice Jet is concerned then we are trying our best to put our capacities in place. However, we have an advantage and that is that SpiceJet flies the same aircraft that was flown by Jet Airways. So, we have a complete infrastructure, like pilots who can fly those aircraft, crew members and engineers who can work in them among others, of the same plane. In fact, SpiceJet is the only airline company in India who can acquire the old aircraft of Jet Airways and fly them, and we are trying to do so.
Q: Tell the numbers that have been acquired and of those that will be acquired in future?
A: SpiceJet has signed agreements for 28 Jet aircraft till date and is in discussion to add more 15 aircraft in our fleet. Our second objective is to take care of the jobs of the trained and dedicated employees of Jet Airways who are in danger of losing their jobs. That is a reason that we have planned to hire the best of them instead of training new people for the task and then fly the planes.
Q: Update us on your route expansion plan and provide numbers of routes where you will be serving?
A: Our first aim is to suffice flights at the places that are facing a shortage of flights today. In fact, flights will be placed on routes wherever the jet flights have been withdrawn or taken off as well as the region that is facing a shortage. At the same time, I will like to inform you that our network will grow by at least 60-70 per cent after Jet and Max aircraft will join our fleet, maybe in one year. So, we will expand a lot and run it efficiently.
Q: How will you fund all these things as it is a capital-intensive business?
A: See, huge funding is not required to take the planes. Complete business runs on advance booking and that is a reason that there is no problem related to cash flow. Secondly, SpiceJet is in a strong position today and we don’t think that there is any need for fundraising. If there is a need to go for it then we have several options for the purpose and there is no shortage for it. But, I think more than sufficient cash flow, for next year, is available with us and it can be used for expansion needs.
Q: Will SpiceJet get into a business class mode?
A: See, two class of Jet Airways aircraft are coming to us and we don’t have enough time to convert them into a single class plane as there is a huge shortage of capacity and there is a need of adding capacity as soon as possible. Incidentally, two class of planes are available with us, now, and that is why we thought to experiment as Air India is the big player in business class while Vistara is a small player in the segment. Jet Airways was a main player in the business class but its sudden grounding and availability of their planes and existing demand in the market made us think to experiment ourselves in the domain. So, we are starting our services in business on trunk routes and international routes from May 7 and see how it goes.
Q: Update us on the codeshare partnership that was signed between Emirates and SpiceJet and how it will benefit you?
A: The discussions started months bank and it has nothing to with the ongoing problems of Jet Airways. But, I think that it is an opportunity for airline companies in India where they should not only collaborate with foreign airlines but also compete with them. Emirates is one of the best airline companies of the world and we just wanted that Indian passengers can have access to the expansive network of Emirates and move to international destinations at an ease. They have access to around 125 international destinations. This codeshare agreement, whenever it becomes active, will allow our passengers to opt for any international destination by logging into SpiceJet website, for instance, a person sitting in Jabalpur can book a ticket from Jabalpur to San Francisco. Similarly, Emirates passenger will reach any destination in India, where are serving. This is one alliance and we will be making such alliances with other airlines too. In future, we will be collaborating as well as competing with them.
Q: Reports and analysts suggest that grounding of Jet Airways will have a positive impact on SpiceJet. How much you will leverage on it and the amount that will translate into your books?
A: Our main aim is to address the problems being faced by consumers. We are in a situation where SpiceJet is the only company that was flying Boeing 373 engines, and this is something that is providing a disproportionate advantage to us and I don’t deny that. We will try to get more and more aircraft, their staffs and fly on the most effective routes. Its impact on our market share and profitability is a different issue and as a prudent airline, we always focus on profitability. That is why we have never rushed towards the market share and have been profitable in 17 of the 18 quarters. We have always tried to have an eye on profitability as we don’t want that other airline faces the same consequence that was mended on Jet Airways. So, we will try to keep rational fares being profitable.
Q: Let us know about the performance in the cargo business, where you are quite bullish?
A: It is performing well, and it has the potential and we will work on it in future. It is a time when people are focusing on passenger and Jet Airways, but I think that Air Cargo business will see exponential growth in coming time.
Q: Taxation is one of the major problems for the aviation sector. What is your look on it and how it will resolve in future?
A: See, it is a global business and any country can’t keep aviation turbine fuel (ATF), the single largest input, 40 per cent more expensive from the rest of the world. It is not sustainable, and we will have to find a solution for it. Bringing ATF under GST ambit can be one solution for it and it has been discussed several times with the government and it has accepted it and it has also been discussed at GST meeting and several states have also agreed on it because bringing it into the ambit of GST will not lead to any revenue loss. Hopefully, the GST council will pick it up for discussion in its next meeting in July 2019, when it meets once again after the elections are over.
The second issue is related to import duty that is slapped on the spare parts and engines when they are sent outside for repair purposes, but no other country does that. This is an additional cost and there are several such small things that are increasing our costs and they should be resolved. Secondly, we will have to create international hubs in India, and it has been done in Dubai, Abu Dhabi, Singapore and Bangkok. Interestingly, we have traffic, passengers and a huge market to support it. It can be achieved only after Indian airlines will be able to take is passengers directly to international destinations and stop transacting through these international hubs. Air India is the only airline functional in India that is into long haul operation and it is not a good thing. I think that we have the policy to encourage other players to be in the segment.
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