2009, APRIL 2009, AVIATION, FEATURED, SECTORS

Spicejet: The Spice of Success

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Chaotic is the word that best describes the aviation sector across the globe today, thanks to the deepening global economic slowdown. And more so in our country. Chaotic in terms of service quality which is nothing but pathetic; delays that run into hours on end; poor airport infrastructure, even after privatisation; lesser profitability and poor safety standards. More important, the chaos is even more visible on the branding front, barring one or two airlines which continue to play the premium card with reasonable success. Let’s not forget that all the eight major carriers including the three legacy carriers—Kingfisher, Jet and Air India— are also playing only on the pricing front. In such an industry, which has been bleeding for quite sometime and is set to log a $2-billion loss this fiscal even after oil prices dropped to record lows, making a mark is not an easy job for any airline.

But there is some glimmer of hope. Some players such as SpiceJet has made some commendable improvements in customer satisfaction score as well as its bottom lines.

The New Delhi-based SpiceJet, the second largest low-cost airline in terms of market share as of January-March quarter of 2009 with 12.06 percent (up from 10.32 percent in the same quarter the previous year), was launched in May 2005 in Ahmedabad as the second avatar of the now-defunct Modiluft. In February, it gathered a market share of 12.4 percent, significantly up from  7.9 percent last October. This comes at a time when the industry as a whole has seen a full 12 percent fall in passenger traffic during the first quarter of the year. The passenger traffic has gone down from a 111.90 lakh in Q1 08 to 99.22 lakh in Q1 09. Industry-wise, to market share stands the following: Kingfisher is the leader with 27.15 percent of the total pie, Jet Airways follows with 17.85 percent and Air India (domestic) clinches the third slot with 17 percent of the market pie. Indigo, JetLite and GoAir  sit upon 13.46, 7.35 and 2.63 percent shares, respectively. Paramount, primarily meant for low-cost business travellers, commands a lesser 2.05 percent of the market, according to the latest DGCA figures.

Time is Money
How has SpiceJet been able to turn the tide in its favour?  The chief commercial officer of the airline Samyukth Sridharan has a simple answer: outperforming the market in the most crucial area—customer satisfaction. Sridharan says, “we have the best on-time performance score average of 84—the least delays in the industry. While we take an average turnaround time of 15-20 minutes, the others take an average of 30-40 minutes. There are only two or three airlines across the world which have a better on-time performance score—Austrian Air and Southwestern of the US. And given the pathetic state of infrastructure in the country, we’re world-class on this front.”

This is significant, as one of the major reasons for the decline of Air Deccan, which introduced the nation to no-frills flying in August 2003, was its inordinate delays. It is also commendable, since SpiceJet operates maximum flights from the Delhi airport, the most choked airport in the country. Coupled with this is the affordable pricing and better connectivity it offers to all major cities. The airline today operates 115 flights between 18 cities (Ahmedabad, Bangalore, Bagdogra, Chennai, Coimbatore, Guwahati, Goa, Hyderabad, Jammu, Jaipur, Kochi, Kolkata, Mumbai, New Delhi, Pune, Srinagar, Varanasi and Visakhapatnam), offering a seat capacity of over 22,333 per day.

Sridharan also attributes the success to innovative schemes which the airline comes up with from time to time. Timely route planning, same-day return programmes, superior network coverage and regular and effective communication and marketing have helped the airline transform itself into the preferred choice of the middle class as well as of corporate flyers of late.

It also leads in average seat capacity at 194 per flight, which is a tad better only for Paramount, which flies only business   travellers. “Another key reason for our growth is the fact that we have more suitable flight frequencies between major destinations. And the fact that our tickets are cheaper than others is an additional bonus, as they don’t lose much time by flying us. In a market like ours, even a few hundred rupees make a big difference,” says Sridharan.

“Our primary objective is to provide on-time, safe, reliable and quality travel solution at affordable prices to all. Coupled with this is our technical dispatch reliability of 99.6 percent which makes us the airline with the least cancellations. Our efficiency is also reinforced by our single-type fleet (all Boeing 737-800/737-900 ER) and the maximum utilisation of the fleet numbering 19, flying the aircraft almost double the time  legacy carriers fly,” says Sridharan.

Enticing Offers Galore
Targeting any air-traveller who looks for affordable flying, especially the young holidayers, the airline comes up with occasional and timely packages to attract more flyers. For instance, during the last Children’s Day, it offered free tickets to under-12 kids and even allowed parents to send in their kids to vacations for free and unattended. Last month, it announced ‘happy hours’ scheme, a buy-one-get-one-free offer.
Since, more corporate flyers have begun to flock to the airline, as the ripple effect of the global downturn began pinching our corporates too, the airline has introduced hot beverages on-board under the SpiceExpress scheme (Snacks and cold beverages were already on-board for quite some time now). The scheme also allows flyers to book the meal while booking.

Explaining as to why it doesn’t offer full meals on-board, Sridharan says, it’s not the cost of the food that’s prohibitive but it’s the overall overhead and entire supply chain costs which are prohibitive. And hence, the airline does not plan to offer food on-board, as most airlines are operating on razor edge margins now. Sridharan estimates that the average cost of food per ticket would cost around Rs 300. The airline has also increased the quality of in-flight services. “Our crew is much more warm and courteous now,” he informs.

Another innovative customer-friendly scheme is the facility to collect the boarding passes for return flights at the time of the onward check-in for those flyers who would return the same day. The increase in Gulf NRI traffic has made the airline to introduce an innovative luggage handling service free of cost.

Another customer-friendly step is the introduction of roving check-in facility, wherein the passengers  would be handed over boarding passes  on arrival at the entrance without having to stand in the queues. Yet another feature is the SpiceMall value-for-money offering on board. Again, the airline has, for the first time in the country, tied up with Tata-AIG Life to offer travel insurance at a nominal cost of Rs 129.
All these have won it the 2008 Frost & Sullivan Indian Commercial Aviation Emerging Company of the Year Award last November. Spice also bagged the London Smart Travel Asia’s Top 10 Best Budget Airlines Award last September; and the Best LLC Award from the Outlook Traveller in  2008.

Despite having to operate without any incentives, the LLCs are surviving because of better asset utilisation than the legacy carriers, feels Sridharan. “We operate our aircraft for more hours than the legacy carriers do. Also, unlike them we don’t operate shuttle service between two busy sectors like Delhi-Mumbai. We operate more flights in the busy sectors, but not as a shuttle service. In February, we flew the maximum number of passengers into and out of Delhi, thus becoming the largest carrier from Delhi in that month.  While the average time a plane flies per day is 9.5 hrs, we fly much more than that because it makes sense to maximise on the huge lease rentals that we pay for our aircraft.”

How does SpiceJet convey all these promos? What is its marcomm plan? As one of the most marketed airlines in the country, it uses all media formats, including emails and SMSes. According to its agency Contract’s chief executive Umesh Shrikhande, “SpiceJet has build up a good image and sound visibility through its matter-of-fact communication.”

Listed on the BSE and NSE, SpiceJet in which high-profile investors  like the Tatas with eight percent and American PE investor Wilbur Ross have invested   is among the first LLC to venture into the cargo operations in June 2008. The LLC  has cargo services from 12 cities with a daily capacity of 300 tonnes. Further, the airline is also permitted to operate its flights in the low visibility takeoff of 200 m under CAT II operations.

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