Aircraft de-registration ruling to not impact biz: SpiceJet

Sonia: What is the exact quantum of payment that you have to make to the lessors and when do you plan to do that?

A: The overall quantum of payment due to all lessors is significantly less than the number which is often quoted in the media. We actually owe -- net of funds which are due on us -- about Rs 160 crore so it is not a huge amount. In the media you see Rs 700 crore and other inflated numbers it is much smaller number.

A number of lessors have been fully paid off and there are two or three which went to court during the crisis back in December. So this is pre ownership change, pre funds infusion – this court case. For those because it is litigation obviously they have not been paid off yet because we are waiting for outcome of litigation.

In the meantime, we have been in discussion with these lessors. We are eminently closed to announcing a settlement with one of them already and we are in very advanced discussions with the other. So we expect no operational impact from this court announcement yesterday.

It is a legacy again of December last year when we were in financial crisis. A lot has changed since then. New ownership, new funding has come in and therefore I would not read too much into this. We will take whatever action that are required to protect ourselves in terms of appeals etc. More importantly we are different airline from what we were when these court cases were filed.

Latha: When do you accept to re-register those six aircrafts?

A: They have not been de-registered yet, we will appeal that; but like I said the important thing is that with one of the two lessors involved in yesterday’s court ruling we have reached an impressible agreement and an announcement on that is imminent. We are on advanced discussions with the other. So we do not expect that this will actually result in any aircraft leaving the fleet at all. We expect no operational changes no operational deception at all.

Latha: You mean you have all your 32 craft flying?

A: Yes, absolutely.

Sonia: Give us some updates on the fund infusion that has come in from Ajay Singh already? How much more is pending?

A: Well, about Rs 500 crore has come into the company since the crisis in December. As Ajay has described and mentioned previously two more tranches of Rs 500 each are expected one by the end of this month and one by the end of the next month. We believe with those two additional infusions we will be fully recapitalised and this situation will be fully behind us.

Latha: There will still be passenger’s psyche about news that has come and news that was coming the past several months. What is the capacity at which you are flying and will you have to offer some sops to lure back passengers?

A: I do not believe so. Passenger confidence has come back. Our flights are going extremely full 85 -95 percent load factors. Bookings are strong, revenue performance may pull sharply. It is very important to understand that we are a very different airline from what we were in late 2014.

We have received the first tranche of funding. We are in the process of paying off creditors in the phased manner. All taxes have been paid, all salaries are current. Several lessor who has supported us to in the crisis have been paid off in full and payment plan discussions are actively on going with the remaining lessors.

So our operations are normal, our on time performance is great now we were number two on time in February the last month for which we have Directorate General of Civil Aviation (DGCA) data. Market confidence is high I mean basically we are a new airline, we are a different airline now and this court ruling is a legacy of the past which will not impact operations.

Sonia: The last DGCA data we have on market share is as on January 2015 which is about 9.4 percent for SpiceJet which is significant loss compared to what you have seen in the recent past. How do you plan to revive market share and say in the next 6-12 months what is the market share target?

A: That is a great question; we do not have market share targets. We have profitability targets a performance target, our market share the peak was above 21 percent last July it has borne in to 10 percent now because we reduced our fleet during the crisis. We expect to add back about 8 Boeing aircraft to our schedule for the summer starting next month so we will be back to 25-26 Boeings for the summer schedule.

We expect to add further 8 aircraft in the second half of this year to be back up to above 34 Boeings by the end of this year. That is what we were at when we reached the market share of 21 percent back in July. Again market share is an outcome it is not the objective. Our objective is to minimise the cost, maximise revenues and become profitable. We are well on the path to achieving that.

Sonia: Lots of new discounts strategies from SpiceJet -- the recent one is the 'Let's go abroad' strategy. Any more on the anvil?

A: All of these offers -- 'Let's Go Abroad', we hope it catches the imagination of public. Everyone wants to go abroad and have a foreign holiday. These offers and sales are designed to get rid of excess inventory. The seats that you would expect to otherwise go empty even if you are flying 85-90 percent loads that means 10-15 percent of your seats are flying empty and once the aircrafts takes off you can sell that seat later. That seat has gone.

So these are designed by sophisticated revenue management systems to help us get some revenue for those seats rather than no revenue. So these are incremental to the bottom-line and we will continue doing this. This is our basic revenue management it is not distress sale it is not anything extra ordinary this is what airlines do all around the world especially low cost airlines. In India we sort of started this last year it was not being done very much in the past but this is a right thing to do and that is why you see everyone doing it now because it helps everyone’s bottom-line.