What to make of SpiceJet’s old wine in a new bottle FFP

Early this week, Spicejet, India’s second-largest low-cost carrier (LCC), relaunched its frequent flier programme named SpiceClub. This is the third version of the airline’s frequent flier programme. The airline launched a prepaid FFP in 2016 and followed it with a revamped free for all programme in August 2018.

While the revamp in 2018 was a major difference from its initial launch, the current one looks more like old wine in a new bottle.

The airline has opted for a spend-based programme rather than a miles-based one that is common with full-service carriers. The new SpiceClub allows members to earn up to 10 points for every Rs 100 spent on booking flights and add-ons. Each point is equivalent to Rs 0.5 when it comes to redemption. Potentially, a customer benefits for 50 paise for each Rs 100 spent with SpiceJet.

The perks — free flight vouchers, free change/ cancellation, complimentary meals and upgrade, priority check-in, free seat selection and more are in line with frequent flier programmes of other airlines. The real question is this: LCCs are known to stay from frequent flier programmes to cut associated costs — so why does SpiceJet want to get into this business?

Typically, an FFP is associated with additional costs, a marked departure from the no-frills model associated with LCCS. But Indian LCCs have veered away from the core LCC philosophy long ago.

Also Read: Spicejet launches frequent flyer programme ‘SpiceClub’

SpiceJet has been on the receiving end on multiple fronts. The latest setback is its cash position that is facing stress.

The airline is developing a separate partner platform that will help SpiceClub members earn additional points. This probably indicates in-sourcing what is currently outsourced by other airlines.

Most airlines have partnerships with a company named AVA that allows a passenger to buy goods from a catalogue at a discounted price during a flight. These are not so well-known brands and airlines often make huge margins in the process.

Could the FFP tactic be a way to expand into the market beyond aviation? SpiceJet is the only airline in the country which is not backed by a large conglomerate. This could mark its entry into a market beyond aviation.

Air India and Vistara both have an FFP and so did the grounded Kingfisher Airlines and Jet Airways. But FFPs have not been differentiators so far. IndiGo, India’s largest carrier by fleet and domestic market share, has steered clear of an FFP.

As of last month, the airline dominates over 60 percent of the domestic market. Since the second phase of liberalisation of aviation in India, which coincided with the advent of LCCs in the country, passengers have mostly shown loyalty to just one thing— lower costs—seldom looking at other factors on most segments.

In a world where data is considered oil, FFPs are a gold mine of data. And FFP can help raise cash. Etihad purchased 50.1 percent stake in Jet Privilege Private Ltd (JPPL) for $ 150 million in 2014. JPPL was a separate entity from 2012, until it was hived off and the stake sale helped the airline retire a lot of debt.

"The loyalty programmes of Jet Airways, Vistara and Kingfisher were a significant driving force for the airlines to bring back repeat customers to these airlines. For Jet Airways, for instance, despite the reduced product in its' last stages of survival, the airline's frequent flyers would fly with the airline because they gave their loyal customers perks such as baggage allowance, lounge access and free meals on board,” said Ajay Awtaney who runs LiveFromALounge.com, an aviation and loyalty analysis website for India.  The SpiceJet FFP, eh said, continues to evolve at this point in time and does not have a significant role to play in the decision making for customers.

SpiceJet has made some right moves in the past, the codeshare with Emirates, expanding capacity without adding planes, shifting terminals to get edge over rivals, setting up a cargo subsidiary and more. While the airline made the most of the Jet Airways suspension and got unprecedented boost at Mumbai, the non-functional codeshare with Emirates, absence of sea-planes for which it holds routes under RCS-UDAN and a proposed hub at Ras Al Khaimah are some of the things which have failed to take off for long.

A consistently higher occupancy rate can only get the airline thus far, it would require hard cash to sustain and going by the last results. The airline definitely does not have a war chest with it. Both Jet Airways and Kingfisher had some brilliant ideas towards the end of their life. Unfortunately, none of them could stay afloat to implement them.

With a lot of ideas lined up by SpiceJet—including operations to London, wide-body aircraft for cargo operations and more, the cash positions remain one of worry and it will be curious to see how the FFP ploy fits into the overall scheme of things in months to come.