SpiceJet Flights to Profit

8/3/2019 SpiceJet Flights to Profit

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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?



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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



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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



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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).



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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



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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.)



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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)



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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



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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

` Asfdsf

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Documents

SpiceJet Flights to Profit