SpiceJet co-founder Ajay Singh, who recently made a comeback as the airline’s white knight, giving it a new lease of life just as it was staring at imminent closure, speaks to Tushar Srivastava on the challenges facing the Indian aviation sector.
What made you buy out Kalanithi Maran’s stake in SpiceJet?
SpiceJet has a great brand that is nationally recognised. I anticipate that there will be great growth in the aviation sector and the economy under the new government. So it’s a very good time to be in aviation. I also felt that SpiceJet deserved to survive and had the potential to become a great airline again. SpiceJet’ failure would have had an adverse impact on the investment climate in aviation as well as on the Indian economy as a whole because airline failures are very visible.
What ails the Indian aviation sector?
I think it’s a combination of high costs and irrational competition. Over the years, I think the cost structures have been pretty high. Global crude prices were very high, which was exacerbated by the fact that taxation on aviation turbine fuel (ATF) in India is very high. The competition has been pretty irrational and there have been players like Kingfisher and Air Deccan who have indulged in pretty adventurous pricing.
What can the government do to address these problems?
The government could create an environment conducive to the growth of the sector. Growth of aviation has a multiplier effect on the economy. Taxation on ATF and air services needs to be rationalised.
By when can SpiceJet be turned around?
SpiceJet can be turned around in a year. The airline needs to get back to basics. A low-cost airline is about low cost, so you need to create structures that reduce costs. Consolidate the network and increase revenue by focusing on flights that make you more money. By summer, we should have a fleet of 25 B737s.
Will you retain the Q400 fleet?
I still have to decide. But generally I am in favour of a single aircraft fleet.
Will SpiceJet continue with its frequent flash sales?
Sales are part of a low-cost airline’s functioning, but they needn’t be dilutive. As long as sales are managed sensibly, they create excitement and spur demand and don’t dilute airline fares.
Has the Indian aviation sector reached a saturation point?
India needs much more aviation capacity. Just around 2.5% of Indians currently travel by air. That number will certainly rise. Air travel is aspirational and young Indians would rather fly than travel by any other means.
What are your views on the new airlines set to enter the Indian market?
New airlines need to be well capitalised and have real expertise in running the business. They need to behave sensibly. If very many licences are given and new airlines start up and fail, it impacts the credibility of Indian aviation. We should discourage non-serious players who come into the market, burn a few hundred crores and flame out and die.