Why is aggression in fleet size increase and pan-India penetration ‘illogical’ for SpiceJet and other LCCs in the current times? B&E’s steven philip warner presents an insight...
“What the hell is going on? It’s a bloody godforsaken route…
How can we fly with just five passengers?” shouted a SpiceJet official as we were waiting in the lobby of the carrier’s office in Gurgaon; words that gave us more than just an idea of the ‘discomfort’ prevailing in the LCC camps in the domestic aviation sector. Ten minutes later, we found ourselves seated in a ‘simple’ cabin which belonged to Siddhanta Sharma, Executive Chairman, SpiceJet Limited. There was just one photograph on the wall, that of Mother Teresa, perhaps a sign of what was missing in the hearts of many at SpiceJet and other LCCs – peace! Four cigarette buds snubbed on the ashtray revealed that the man on the desk (we were still waiting for him) had been extremely busy of late. And finally, the cup of black coffee on his table, silent & still… getting colder by the minute, perhaps symbolizing the half-hearted smiles flashed by LCCs who once dreamt of making it big; the only ‘big’ things they got were ‘big’ aircrafts & ‘bigger’ elusive dreams!
Domestic aviation is clearly at a crossroads. While on one hand, players are losing out on precious funds, on the other, rising fares are ensuring a fall in demand by the day for LCCs. Full Service Carriers (FSCs) on the contrary, are gaining lost ground; sad news for the middle-class Indians, is how we put it. Siddhanta justifies the thinning situation as, “As far as the fares are concerned, low cost does not mean that your fares remain low and constant. Also, one reason why market share has gone in favour of some fsc carriers is because they have been adding capacity as well.” If that’s so, why isn’t SpiceJet adopting an aggressive strategy to increase fleet size from the current 17? Explains a logical Siddhanta: “Today is the question of survival! You can’t be aggressive just for the heck of it! We just can’t go on adding capacity illogically. Given our philosophy of maintaining the same aircraft types, there are not many destinations you can go to where you can fill 189 seats every time.”
Infrastructural hurdles come next. So what is SpiceJet’s take on it? Explains Siddhanta, “There are two critical airports in India which are suffering – Mumbai has almost shut down for the next 4 years, so there is no flight addition possible now. And Delhi is stuck for another year. So we don’t want to be in a state where we have machines but don’t know where to put them!” Careful strategic planning with minimum risks indeed! It is admirable that SpiceJet is not behaving like the fabled ‘greedy dog’ and going for capacity expansion despite 45% of India’s domestic traffic emanating from these two airports. While today we see all the major players in the industry combining aircraft types, SpiceJet does not plan the same; not even if they go international! “We will continue following the typical low cost model. We won’t fall in the trap of using varied aircrafts like ATR, Airbus et al, which will only increase our operational costs. And even if we go international, we will maintain homogeneity in terms of aircraft composition.” Some reason why SpiceJet is today the most efficient carrier in the Indian skies as Syed Sagheer, Aviation Expert, PINC Research confirms, “Spicejet concentrates on operating metrics like load factor & on-time performance, which is the ‘best’ in the industry. Thus we can classify its strength as established niche player.”
Of surprise is the fact that SpiceJet has stuck to 18 destinations while other airlines try hard to spread their wings pan-India. Siddhanta confidently explains the raison d’être as, “We will also not fall in the trap of expanding to every city in India. If we go to an airport where we cannot serve 5 times per day, then we won’t go there. Given the philosophy of having the same type of aircrafts, we can’t have our flights going to tier III cities as we can’t have 40-50 seater aircrafts. So whilst the erstwhile LCC leader might have gone to 60-62 cities, the wisdom in going to so many stations lies with them,” But isn’t first mover advantage a traditionally successful concept in business strategy? “There is no such thing as first mover advantage in this industry because here the brand loyalty is low...” comes the knee-jerk response from Siddhanta.
“What the hell is going on? It’s a bloody godforsaken route…
How can we fly with just five passengers?” shouted a SpiceJet official as we were waiting in the lobby of the carrier’s office in Gurgaon; words that gave us more than just an idea of the ‘discomfort’ prevailing in the LCC camps in the domestic aviation sector. Ten minutes later, we found ourselves seated in a ‘simple’ cabin which belonged to Siddhanta Sharma, Executive Chairman, SpiceJet Limited. There was just one photograph on the wall, that of Mother Teresa, perhaps a sign of what was missing in the hearts of many at SpiceJet and other LCCs – peace! Four cigarette buds snubbed on the ashtray revealed that the man on the desk (we were still waiting for him) had been extremely busy of late. And finally, the cup of black coffee on his table, silent & still… getting colder by the minute, perhaps symbolizing the half-hearted smiles flashed by LCCs who once dreamt of making it big; the only ‘big’ things they got were ‘big’ aircrafts & ‘bigger’ elusive dreams!Domestic aviation is clearly at a crossroads. While on one hand, players are losing out on precious funds, on the other, rising fares are ensuring a fall in demand by the day for LCCs. Full Service Carriers (FSCs) on the contrary, are gaining lost ground; sad news for the middle-class Indians, is how we put it. Siddhanta justifies the thinning situation as, “As far as the fares are concerned, low cost does not mean that your fares remain low and constant. Also, one reason why market share has gone in favour of some fsc carriers is because they have been adding capacity as well.” If that’s so, why isn’t SpiceJet adopting an aggressive strategy to increase fleet size from the current 17? Explains a logical Siddhanta: “Today is the question of survival! You can’t be aggressive just for the heck of it! We just can’t go on adding capacity illogically. Given our philosophy of maintaining the same aircraft types, there are not many destinations you can go to where you can fill 189 seats every time.”
Infrastructural hurdles come next. So what is SpiceJet’s take on it? Explains Siddhanta, “There are two critical airports in India which are suffering – Mumbai has almost shut down for the next 4 years, so there is no flight addition possible now. And Delhi is stuck for another year. So we don’t want to be in a state where we have machines but don’t know where to put them!” Careful strategic planning with minimum risks indeed! It is admirable that SpiceJet is not behaving like the fabled ‘greedy dog’ and going for capacity expansion despite 45% of India’s domestic traffic emanating from these two airports. While today we see all the major players in the industry combining aircraft types, SpiceJet does not plan the same; not even if they go international! “We will continue following the typical low cost model. We won’t fall in the trap of using varied aircrafts like ATR, Airbus et al, which will only increase our operational costs. And even if we go international, we will maintain homogeneity in terms of aircraft composition.” Some reason why SpiceJet is today the most efficient carrier in the Indian skies as Syed Sagheer, Aviation Expert, PINC Research confirms, “Spicejet concentrates on operating metrics like load factor & on-time performance, which is the ‘best’ in the industry. Thus we can classify its strength as established niche player.”
Of surprise is the fact that SpiceJet has stuck to 18 destinations while other airlines try hard to spread their wings pan-India. Siddhanta confidently explains the raison d’être as, “We will also not fall in the trap of expanding to every city in India. If we go to an airport where we cannot serve 5 times per day, then we won’t go there. Given the philosophy of having the same type of aircrafts, we can’t have our flights going to tier III cities as we can’t have 40-50 seater aircrafts. So whilst the erstwhile LCC leader might have gone to 60-62 cities, the wisdom in going to so many stations lies with them,” But isn’t first mover advantage a traditionally successful concept in business strategy? “There is no such thing as first mover advantage in this industry because here the brand loyalty is low...” comes the knee-jerk response from Siddhanta.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative
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Source : IIPM Editorial, 2008
An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative
Read these article :-
ZEE BUSINESS BEST B SCHOOL SURVEY
B-schooled in India, Placed Abroad (Print Version)
IIPM in Financial times (Print Version)
IIPM makes business education truly global (Print Version)
The Indian Institute of Planning and Management (IIPM)
IIPM Campus
Top Articles on IIPM:-
'This is one of Big B's best performances'
IIPM to come up at Rajarhat
IIPM awards four Bengali novelists
IIPM makes business education truly global-Education-The Times of ...
The Hindu : Education Plus : Honour for IIPM
IIPM ranked No.1 B-School in India, Management News - By ...
IIPM Ranked No1 B-School in India
Moneycontrol >> News >> Press- News >> IIPM ranked No1 B-School in ...
IIPM ranked No. 1 B-school in India- Zee Business Survey ...
IIPM ranked No1 B-School in India :: Education, Careers ...
The Hindu Business Line : IIPM placements hit a high of over 2000 jobs
Deccan Herald - IIPM ranked as top B-School in India
India eNews - IIPM Ranked No1 B-School in India
IIPM Delhi - Indian Institute of Planning and Management New Delhi ...domain-b.com : IIPM ranked ahead of IIMs
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