SpiceJet, curiously, is not flying metro routes. Why is that?

SpiceJet

More often than not, one wonders how SpiceJet continues to survive against all odds—both internal and external. The airline has had its balance sheet decked up with potential income from grounding of its Boeing 737 MAXes for a couple of quarters, with the US manufacturer of the planes paying the airline compensation. With the aircraft now back in operation, this source (though on paper) has stopped.

The separation of SpiceXpress, the cargo arm, on a slump sale basis has not been completed and there indeed is much to write about that has already been written about. The two wide-body 777-200 ER cargo aircraft that were part of the settlement with Boeing are nowhere to be seen. Its hub at Ras Al Khaimah in the United Arab Emirates is yet to take off, as is its codeshare agreement with Emirates.

The airline has delayed Q4FY22 and full-year FY22 results citing a ransomware attack so the latest financials are not known. But in the third quarter—the best post-COVID lockdown—the airline clocked a revenue of Rs 2,259 crore. It operated 31,175 flights during that period which comprised 26,456 scheduled domestic services, 1,671 non-scheduled domestic services and 3,048 non-scheduled international services, shows data released by the Directorate General of Civil Aviation. This includes both passenger flights and those operated for cargo as full freighters or passenger aircraft converted into cargo planes, popularly known as preighters.

The airline has also been clocking the highest passenger load factors all along while there is some anecdotal evidence that a few sectors might have seen cancellations and combination of flights, that alone is not the reason for high loads. Revenue which keeps coming in, highest load factors and a steady flow of passengers ought to have a reason and while the product forms an essential part of any airlines offering, the core offering remains its network. For no airline can make money even by offering the best product if it does fly routes where there is demand.

Negligible presence on metro routes

Intermittently, the Delhi-Mumbai sector makes it to the top 10 routes in the world by capacity. One would expect just about everybody to vie a piece of this pie, but not SpiceJet. The airline has only four daily flights between Delhi and Mumbai, just 8 percent of total frequencies. On the second busiest route, Delhi-Bengaluru-Delhi, SpiceJet has just two daily flights and only 5.5 percent of the frequency share. The same story plays out across most metro routes. On most sectors it is restricted to two or three frequencies, while IndiGo, the market leader, operates nearly half of total frequencies on any given sector.

The airline does not offer any services to Hyderabad and Bengaluru from Mumbai. The airline has also vacated the Bengaluru-Hyderabad route where it once had a sizeable presence, operating multiple flights with the Bombardier Q400 turboprop aircraft. The situation is the same for the Hyderabad-Chennai sector. On some sectors like Hyderabad-Kolkata, there is only one flight a week, every Tuesday.

Then where is the airline flying?

Obviously, SpiceJet—which is vying for the second place in Indian skies—does fly somewhere, but where is it and what is the strategy? Indian carriers were operating on 999 sectors last month, as per schedule data by OAG Aviation shared exclusively for this article. SpiceJet operates 269 out of these. A staggering 104 out of these or 38.66 percent are monopoly routes!

The airline has better presence on leisure routes like Delhi-Srinagar or Delhi-Goa, where it has 20 percent and 16 percent of capacity share, respectively. The airline has focused on routes that have either been under the UDAN regional connectivity scheme or where it is not possible for other airlines to compete due to clauses under RCS-UDAN that grant the operator exclusivity for three years. Bengaluru-Darbhanga, for example, has two daily SpiceJet flights, the same number that the airline operates on the much denser Delhi-Bengaluru sector!

The airline has focused on Gorakhpur, Jabalpur, Gwalior and Dharamshala, among other destinations, to shore up its business. A quick read shows that the fares being quoted on these routes are much higher than on metro sectors with a similar block time. While this sounds interesting, the challenge arises when the competition joins in because these smaller markets may give better returns, but there is a limit on the traffic elasticity and unlike metros, traffic isn’t enough to cater to multiple players at the same time without hurting the bottom lines. No wonder then the airline has vacated a lot of stations and routes when competitors enter.

Tail note

The void left by Jet Airways for partnering with foreign carriers is being filled by IndiGo, which could have potentially been an equal game for SpiceJet as well. But to have an interline agreement or code share, one needs frequencies on at least the top 15 to 20 markets at various times of the day to ensure good two-way connectivity. SpiceJet, though, has been focused on saving the day—each passing day—than thinking strategically, at least for now.

Settlement of pending cases, fleet renewal and product standardisation are just some of the priority items for the airline right now and all of this requires funds. While funds may or may not be hard to come by, the immediate focus on the route side is to look for higher revenue than to compete for metro traffic. While this strategy could do well currently when business traffic is not fully back to normal, when it does return, business traffic is the king!