Singapore/New Delhi: The prospective owners of Indian low-cost carrier SpiceJet Ltd plan to cut the airline's fleet, shrink its network and return to a "plain vanilla" business model to achieve profitability, two people close to the investors said.
Their plans include culling the 15 Bombardier Q400 regional aircraft from the airline's fleet and sticking to Boeing 737 narrow body jets, and focusing on profitable services to and between India's major cities, said the sources.
SpiceJet said on Thursday that Ajay Singh, who helped found the airline in 2005, has agreed to buy a controlling stake from billionaire majority owner Kalanithi Maran's Sun Group.
He was expected to submit his plan, which could involve an investment of $240 million, by the end of January. The plan would need regulatory approval.
Singh told Reuters on Thursday the airline could break even in the next financial year by keeping its costs low and taking advantage of low oil prices.
"SpiceJet has excellent service standards and on-time performance, but it became too complex. It added a second type of aircraft and served too many new markets. This came at a very high cost," said one source familiar with Singh's plans.
"It should aim for a plain vanilla business with only one type of aircraft, a lean workforce and a focus on low costs. That is why IndiGo and AirAsia are successful."
Low-cost carrier IndiGo is India's biggest airline. Indigo, GoAir and the Indian affiliate of Malaysian budget carrier AirAsia have all charted aggressive expansion plans and could benefit from a smaller SpiceJet, given that fares are likely to go up.
16/01/15 Siva Govindasamy and Tommy Wilkes/Reuters
Their plans include culling the 15 Bombardier Q400 regional aircraft from the airline's fleet and sticking to Boeing 737 narrow body jets, and focusing on profitable services to and between India's major cities, said the sources.
SpiceJet said on Thursday that Ajay Singh, who helped found the airline in 2005, has agreed to buy a controlling stake from billionaire majority owner Kalanithi Maran's Sun Group.
He was expected to submit his plan, which could involve an investment of $240 million, by the end of January. The plan would need regulatory approval.
Singh told Reuters on Thursday the airline could break even in the next financial year by keeping its costs low and taking advantage of low oil prices.
"SpiceJet has excellent service standards and on-time performance, but it became too complex. It added a second type of aircraft and served too many new markets. This came at a very high cost," said one source familiar with Singh's plans.
"It should aim for a plain vanilla business with only one type of aircraft, a lean workforce and a focus on low costs. That is why IndiGo and AirAsia are successful."
Low-cost carrier IndiGo is India's biggest airline. Indigo, GoAir and the Indian affiliate of Malaysian budget carrier AirAsia have all charted aggressive expansion plans and could benefit from a smaller SpiceJet, given that fares are likely to go up.
16/01/15 Siva Govindasamy and Tommy Wilkes/Reuters
No comments:
Post a Comment