Worrying when market leader is in loss: SpiceJet CMD
SpiceJet’s record average passenger load factor of 92% for 19 months in a row is not a consequence of low fares, said Ajay Singh, CMD SpiceJetbusiness Updated: Dec 12, 2016 10:39 IST
SpiceJet’s record average passenger load factor of 92% for 19 months in a row is not a consequence of low fares, Ajay Singh, CMD SpiceJet, tells HT in an interview.Excerpts:
Q. Rivals have taken potshots at your load factors saying you sell below costs. Comments?
A. If that is true, how can I have seven quarters of profit? Today, at an operating level, SpiceJet made a profit even in a very weak Q2. If I was selling below cost how would I be making a profit? Clearly, I am not. Our average fares amongst the low cost airlines are amongst the highest. The load factor is not a consequence of low fares.
Q. Jet fuel prices are going up. Is it a cause of concern?
A. There are some concerns. We remain the most highly taxed aviation sectors in the world. Input costs such as fuel and airport is very high and these costs continue to increase. Demonetization has led to some concerns as there is a fall in demand. Q2, of course, is the traditional weak quarter in the year but even in a traditional weak quarter to see the market leader make a loss at an operating level is not a healthy sign for the industry. We need to work very aggressively with the government and all our peers to reduce cost in the aviation space so that we can all grow profitably.
Q. You said the market leader made an operating loss in Q2. Can you elaborate?
A. It’s a well known fact and it’s not anything hidden. In their documents you can see that a significant amount of money is coming in terms of engineering credits, which is another name for sale and lease back profit, and in terms of finance income. Remove these, and you will see an operating loss. This is a worrying thing when at an operating level the largest airline in the country makes an operating loss, even if it is in a weak quarter. We must work together to create an industry where we can lower costs, lower fares, stimulate the market and still be profitable.
Q. So you think the attacks on SpiceJet’s load factors are unfair?
A. It’s completely unfair, completely wrong. We have clearly shown that we continue to make profits at an operating level whereas some of the other airlines can’t say that. The load factors are happening but profits are also happening continuously.
Q. Do you feel you are falling behind, since IndiGo’s market share has touched an all-time high of 42.6% whereas yours is at 12.9%?
A. They are inducting capacity. What is there to be worried? It should be clear that there is no anti-competitive behaviour. As long as that is clear it is for everybody to go on their own strength.