Aug 28, 2012

SpiceJet to start flights to China, Riyadh by October

Tarun Shukla

SpiceJet Ltd will start flights to China by October as the low-fare carrier expands its global footprint. Indian carriers haven’t been too successful with flights to the Chinese mainland. Jet Airways (India) Ltd, which started flights to Shanghai in June 2008, stopped them in January 2009. State-run Air India Ltd also flies to Shanghai.

The Kalanithi Maran-owned SpiceJet is planning to start flights to Guangzhou from Delhi with its Boeing 737 planes. This is likely to be followed with flights from Delhi to Riyadh and Dhaka. The flight to the Bangladeshi capital, yet to be cleared by the aviation ministry, may be extended to Yangon in Myanmar, depending on government clearance. The carrier is also looking to connect Thiruvananthapuram with Male, the capital of the Maldives, using its short-haul Bombardier Q400 turboprop aircraft, said two officials at the airline who declined to be named.

“All by end of October,” said one of the officials, referring to the start of these flights. He declined to be named.

SpiceJet started a Delhi-Kabul flight in August and is focusing on newer markets to expand its base.

“Yangon will be a bit slow in the beginning, but just see the number of airlines that have started flights there this year,” said a senior official with a foreign airline who follows SpiceJet closely, and who spoke on condition that neither he nor his firm is named. The airline’s other international destinations are Dubai and Colombo.

SpiceJet was going for a so-called blue ocean strategy, developing new markets instead of trying for a share of established markets, the executive said. Rival low-fare carrier IndiGo has, meanwhile, been expanding flights to Dubai from several Indian cities.

“What a company should do depends on its own strengths, the position of its competitors and, to some extent, on customers,” the executive said. “IndiGo has already decided to compete in the established Middle East and Southeast Asian markets, and they have a huge cost advantage over the others. Therefore, Spice’s strategy makes a tremendous amount of sense.”

Budget airlines SpiceJet and IndiGo started international flights in the last two years after they completed five years of compulsory domestic flying.

Mumbai-based budget airline GoAir, which has also completed five years but does not meet the requirement of having at least 20 aircraft in its fleet, has sought government exemption to fly overseas.

Keyur Joshi, chief commercial officer of online travel firm Ltd, commended SpiceJet’s choice of destination in China.

“Guangzhou is a big SME (small and medium enterprise) and trader market and lacks connectivity with India. It would be a winner straight away. It’s more like Hong Kong than China,” Joshi said. “I will be shocked if it doesn’t succeed.”

Connecting China and Africa via Delhi would be a sound strategy for Indian carriers, he said. As for Yangon, fliers may prefer a full-service airline with a wider global network.

SpiceJet is also starting flights from stations in India such as Jabalpur in Madhya Pradesh, previously served by Kingfisher Airlines Ltd. The financially strapped airline has been cutting services drastically since 2011. It’s not clear how the parallel expansion in both regional and international routes will affect SpiceJet’s balance sheet.

“SpiceJet’s financial performance continues to be impacted at a net level by its regional Q400 operations which commenced in Sep-2011 and, as a result, are still in the development stage and are yet to turn profitable,” consulting firm Centre for Asia Pacific Aviation said in a report.

While expanding internationally was a good strategy for the carrier, the “decision to launch its newest international route to Dubai in the summer months, when point-to-point traffic is at its lowest, is also likely to weigh down its Q2 results, and could have been better timed”.

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