Thursday, March 29, 2012

SpiceJet set to cash in on Kingfisher crisis, may make Delhi regional hub

New Delhi: Low-fare carrier SpiceJet Ltd could make Delhi airport its second base for regional flights, taking over some routes vacated by Kingfisher Airlines Ltd, which has shrunk operations because of a funds crunch.

Media tycoon Kalanithi Maran-controlled SpiceJet had ordered 15 turboprop Q400 aircraft from Canadian manufacturer Bombardier Inc. and made Hyderabad its southern hub for regional one-hour flights. At least seven Q400 have been inducted into the airline’s fleet, while the rest are scheduled to join between May and December.

The new plan envisages at least seven of these planes to be stationed in Delhi as their new base and connect neighbouring cities, said an official familiar with the matter, who declined to be named.

“We are certainly looking at the voids that have been created by Kingfisher. We will take advantage of the gap that is left,” SpiceJet chief executive Neil Mills said. “SpiceJet is perfectly placed with the right machine at the right time.”

There’s a lot of advantage in flights to smaller cities, he said, adding that his firm is in talks with Delhi’s airport operator and one other private airport for the base.

Mills declined to say whether Delhi will be the new hub.
GMR Infrastructure Ltd leads the consortium of Delhi International Airport Pvt. Ltd and the airline has a relationship with GMR Hyderabad International Airport Pvt. Ltd.

Kingfisher is operating 16 aircraft, down from 66 last year. It has also halved the number of cities it operates to 28 from 56. Till last year, Kingfisher had the largest network of regional flights with its fleet of turboprop ATR aircraft.

“The ATR sectors withdrawn ex-Delhi are Amritsar, Lucknow, Pantnagar, Agra,” said a Kingfisher executive, who declined to be named.

SpiceJet plans to benefit from these exits. In central India, for example, it has already started flights to Nanded, which used to be an exclusive Kingfisher sector.

SpiceJet’s seven aircraft are now running 59 flights daily. Mills said the carrier will add 12 new cities to its network with the new turboprops this year. Of these eight, one will be stationed in south India, while the rest will be at the new base, he said.

The aircraft induction was planned for January and has been delayed to May because of financing issues, said the official cited above who is familiar with the matter. Mills said these aircraft will join the fleet “as soon as they can be paid off.”

Maran has said he will invest about Rs. 100 crore more in SpiceJet in April and increase his stake in the carrier to 48.6%. It will be the second cash infusion by Maran in SpiceJet in seven months. Maran, who’s the founder of Sun TV Network Ltd, invested Rs. 130 crore in October for an additional 5% of the Gurgaon-based airline.

Mills said the Q400 operations will take at least two years to turn profitable. SpiceJet has posted a loss of Rs. 356.66 crore in the nine months ended 31 December. It has also lost market share in February, falling to 15.9% from 16.3% in the preceding month.

The Centre for Asia Pacific Aviation (Capa) is positive about SpiceJet’s regional operations and expects the exit by Kingfisher Airlines on most ATR routes to be favourable to SpiceJet in the near term, said Kapil Kaul, South Asia chief executive of the aviation consultancy.

SpiceJet has not decided whether it will exercise its option to buy an additional 15 Q400 aircraft and a decision on that will be taken later, according to Mills.

Kaul said regional operations will be critical to the aviation industry’s growth as 79% of traffic is concentrated at six metros. “Capa estimates about 50-plus regional aircraft requirement till 2015,” he said. “However, SpiceJet has become conservative in its plans for expansion beyond 15 planes, compared to an aggressive intent about a year back.”

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