SpiceJet
SpiceJetReuters File

It would be a surprise for anyone to know how budget airline SpiceJet made a turnaround from a near collapse situation in a very short span of time. India's second-biggest budget airline by market share was on the verge of collapse late last year, before an ownership change in January this year that saw Ajay Singh acquiring the entire 58.4% stake held by the Marans.

Following the infusion of funds by Singh to restructure the loss-making airline, SpiceJet returned to profit in the January-March quarter this year, earning Rs 22.5 crore. The airline also posted profits in the following two quarters, supported by a fall in fuel prices and increased passenger traffic on its flights. The turnaround has led to over 260% increase in its shares so far this year.

"The company expects that the current growth of around 20% witnessed in the domestic market shall continue for the next eight to twelve months and thereafter will stabilise at around 10-12%," The Financial Express reported, citing SpiceJet's annual report noted.

SpiceJet recorded a passenger load factor (PLF) of 92% in October and its market share increased to 12.8% in the month. It saw a passenger traffic of 8.99 lakh during the month, according to a data from Director General of Civil Aviation (DGCA).

Here is how SpiceJet made a turnaround:

  1. To turn into profits, the carrier has initiated various cost cutting measures, adopted better pricing mechanism and streamlined its operations of flights on various routes.
  2. The airline expanded its operations to new routes and increased frequency on some routes. It is also planning to purchase 150 aircraft to meet its expansion drive.
  3. The struggling carrier has initiated a fuel management programme that increased fuel efficiency even though there was a rise in passengers and cargo, according to company's annual report.
  4. It cancelled outsourcing of cargo, catering and reservation services to a third party and started handling such services on its own in a bid to improve revenue figures.
  5. The airline came out with innovative fare structures to improve margins besides expanding its operations on international routes.
  6. The restructuring also involved improving productivity by 10% and renegotiating on contracts with service providers for maintenance purposes.
  7. A sharp decline in fuel prices also helped the airline to cut down its operating costs.

 

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