cyrilroy21
31st Jan 2011, 15:02
MUMBAI/NEW DELHI: Low-cost carrier SpiceJet will launch its regional services from July this year, operating on 16 non-metro routes with Chennai, the capital city of Tamil Nadu, as one of its hubs. The airline plans to have at least three bases, one each in the east, north and South regions, for its operations to smaller cities.
SpiceJet will get first of its 15 Bombardier Q400 (regional jet) in June and will use it to launch the services. By the end of this year, it will have eight of these aircraft in its stable. The rest will join the fleet in 2012, SpiceJet CEO Neil Mills said. "Of the 15 aircraft, we plan to have at least 10 for the south Indian market and two each for the east and the north," he added.
SpiceJet is banking on first mover advantage with the launch of regional services as it sees immense potential in the developing market.
It is also using the strategy to counter the growing market share of its competitor, Gurgaon-based budget airline IndiGo , which recently ordered 180 Airbus A320s and has become the number two airline along with Kingfisher Airlines . SpiceJet, however, is at number four with a 13.6% market share. It operates 169 flights daily with a fleet of 29 aircraft.
"Each competition has a strategy of its own. They (IndiGo), are going with a narrow body expansion plan and are also adding international routes, we have decided to grow organically on the domestic routes. In any case, SpiceJet grew by 20% on the Boeing fleet and in the regional market also we will grow by 20%, so this is the additional growth for SpiceJet as compared to the competition," Mr Mills said.
The regional routes will either fly passengers between a metro and a non-metro or between two non-metros with lesser airfares and with significantly less airport charges for non-metro airports.
Industry watchers seem to be in agreement with SpiceJet's move. "We expect air traffic from non-metro airports to increase to 45% from the current 30% in the next 10 years," consultancy firm Auctus Advisors MD Manish Chheda said.
There is a huge demand and supply mismatch as there are few operators on the non-metro routes to cater to a potential 300 million passengers. "Due to insufficient infrastructure, the industry caters to only 50 million at present," said Ankur Bhatia , executive director at travel solutions conglomerate Bird Group. The Airports Authority of India is developing 35 non-metro airports on a public-private partnership basis.
SpiceJet is also expanding its narrow body aircraft base. It has to get deliveries of five Boeing 737s this year and will announce new routes in the coming summer schedule. The fleet expansion will also happen by leasing more aircraft from the market.
"We have added 60 aircraft in the last four months (orders of 30 each for Boeing and regional jets). Our scheduled deliveries are from 2014 for the Boeing fleet. Between 2012 and that period we are looking to add five to six aircraft per year," Mr Mills said.
For its fleet expansion, the airline has already tied up with US Exim Bank for funding the 15 Bombardier order. It requires close to $450 million (list price) to buy these aircraft. "US Exim will pay 85% of the requirement and the rest we will fund through our cash reserves. Since the airline is doing well now, other funding options are always available," Mr Mills said.
The airline will take these aircraft on its books for the first time not entering into a sale and lease back for the Q400s.
For the expansion, SpiceJet will have to hire 150 pilots and 250-cabin crew this year besides the ground duty staff.
"The low cost market space is definitely going to get crowded in India and the competition is bound to increase. It will be tougher for airlines who have not kept their costs under control and our competitors will feel the heat," Mr Mills said.
SpiceJet regional services to take off from July - The Economic Times (http://economictimes.indiatimes.com/news/news-by-industry/transportation/airlines-/-aviation/spicejet-regional-services-to-take-off-from-july/articleshow/7394283.cms)
SpiceJet will get first of its 15 Bombardier Q400 (regional jet) in June and will use it to launch the services. By the end of this year, it will have eight of these aircraft in its stable. The rest will join the fleet in 2012, SpiceJet CEO Neil Mills said. "Of the 15 aircraft, we plan to have at least 10 for the south Indian market and two each for the east and the north," he added.
SpiceJet is banking on first mover advantage with the launch of regional services as it sees immense potential in the developing market.
It is also using the strategy to counter the growing market share of its competitor, Gurgaon-based budget airline IndiGo , which recently ordered 180 Airbus A320s and has become the number two airline along with Kingfisher Airlines . SpiceJet, however, is at number four with a 13.6% market share. It operates 169 flights daily with a fleet of 29 aircraft.
"Each competition has a strategy of its own. They (IndiGo), are going with a narrow body expansion plan and are also adding international routes, we have decided to grow organically on the domestic routes. In any case, SpiceJet grew by 20% on the Boeing fleet and in the regional market also we will grow by 20%, so this is the additional growth for SpiceJet as compared to the competition," Mr Mills said.
The regional routes will either fly passengers between a metro and a non-metro or between two non-metros with lesser airfares and with significantly less airport charges for non-metro airports.
Industry watchers seem to be in agreement with SpiceJet's move. "We expect air traffic from non-metro airports to increase to 45% from the current 30% in the next 10 years," consultancy firm Auctus Advisors MD Manish Chheda said.
There is a huge demand and supply mismatch as there are few operators on the non-metro routes to cater to a potential 300 million passengers. "Due to insufficient infrastructure, the industry caters to only 50 million at present," said Ankur Bhatia , executive director at travel solutions conglomerate Bird Group. The Airports Authority of India is developing 35 non-metro airports on a public-private partnership basis.
SpiceJet is also expanding its narrow body aircraft base. It has to get deliveries of five Boeing 737s this year and will announce new routes in the coming summer schedule. The fleet expansion will also happen by leasing more aircraft from the market.
"We have added 60 aircraft in the last four months (orders of 30 each for Boeing and regional jets). Our scheduled deliveries are from 2014 for the Boeing fleet. Between 2012 and that period we are looking to add five to six aircraft per year," Mr Mills said.
For its fleet expansion, the airline has already tied up with US Exim Bank for funding the 15 Bombardier order. It requires close to $450 million (list price) to buy these aircraft. "US Exim will pay 85% of the requirement and the rest we will fund through our cash reserves. Since the airline is doing well now, other funding options are always available," Mr Mills said.
The airline will take these aircraft on its books for the first time not entering into a sale and lease back for the Q400s.
For the expansion, SpiceJet will have to hire 150 pilots and 250-cabin crew this year besides the ground duty staff.
"The low cost market space is definitely going to get crowded in India and the competition is bound to increase. It will be tougher for airlines who have not kept their costs under control and our competitors will feel the heat," Mr Mills said.
SpiceJet regional services to take off from July - The Economic Times (http://economictimes.indiatimes.com/news/news-by-industry/transportation/airlines-/-aviation/spicejet-regional-services-to-take-off-from-july/articleshow/7394283.cms)