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SpiceJet plans to diversify beyond “pure aviation” to offset fuel price-related risks

SpiceJet is looking to expand into the “cargo and courier logistics”, and “digital aviation” business to hedge the company from the risks of being in a pure aviation business. The businesses are likely to be developed in partnership with international players.

business Updated: Jul 13, 2018 10:48 IST
Yashwant Raj
Yashwant Raj
Hindustan Times, Washington
SpiceJet,Ajay Singh Spicejet,SpiceJet diversification plans
A SpiceJet Boeing 737-800 aircraft taxis on the tarmac after landing at Chhatrapati Shivaji international airport in Mumbai.(Reuters File Photo)

One of India’s largest domestic airlines,SpiceJet is planning to diversify its activities beyond “pure aviation” to protect itself from the high risks associated with the aviation sector, and will soon announce forays into a dedicated freight business in cargo and courier logistics. This could be a first for an Indian airline.

The airline also plans to develop digital aviation and travel products. They are both likely to be in collaboration with international partners.

“We believe that we must hedge ourselves from the risk of being in a pure aviation business and find businesses which are connected to aviation but which could be a little more insulated from the high cost of fuel,” said SpiceJet co-founder and CEO Ajay Singh, adding, “so we are looking at some new areas.”

Rising oil prices are a big concern for the aviation industry as the rest of the world — fuel accounts for an estimated 40% an airline’s costs — and with the United States reimposing sanctions on Iran’s crude exports from November, a fresh round of hikes are expected, unless other oil producers are able to step in with extra supplies, specially for big buyers like India.

Singh, who had co-founded SpiceJet in 2005 and sold it in 2010, only to regain it in 2015 after the company had gone bankrupt, said the company had done “exceedingly well” in the last three years, but there was a need to diversify beyond activities centered around aviation.

The affable SpiceJet CEO, whose multi-billion dollar order of airplanes from Boeing got a shoutout from President Donald Trump during his June 2017 news briefing with Prime Minister Narendra Modi at the White House, was in Washington to receive a leadership award from the US-India Strategic Partnership Forum (USISPF). The first of thee orders are due for delivery in August.

Singh spoke fleetingly of these plans in his acceptance speech and shared some details later; but he was reluctant to give away too much ahead of the announcements, which he said will be made at an “appropriate time”.

The first new area was in the space of “cargo and courier logistics business”, he said. From the few details he gave, this could be a joint venture with an American company — “we believe that there is a lot of experience doing that here in the United States”.

A lot of Indian passenger airlines use “belly space” to carry cargo, but Singh said SpiceJet plans to “expand this into a larger freight business where we have dedicated aircraft, a more expanded logistics business”.

“We will look at possible collaborations … possible partnership,” he added.

Anybody else doing that in India yet? ”Not as yet,” he said.

The second new area being planned is in the digital space — “aviation and travel related” digital products in collaboration with the major international partner; to “improve operating performance, improve consumer experience”.

This could be in collaboration with a major international airline, is all he could say, adding, broadly, these could be products that could be used by both sides.

First Published: Jul 13, 2018 10:48 IST