SpiceJethasbeenoneoftheleadinglowcostairlinesinIndia.

TheIndustrialistSK
Modi,inapartnershipwiththeGermanflagcarrierLufthansa,endorsedthecompany
inyear1996.Inyear2002,thecompanyhadchangeditsnamefromModiLuftLtdto
RoyalAirwaysandstarteddomesticairflights.Inyear1996,theairlinehaltedits
operationsbutaftereightyears,in2004,thecompanyraisednewfundsand
resurrecteditsoperationsasSpiceJet.Inthesameyear,thecompanyalsosigneda
contractwithBoeingtopurchaseBoeing737800aircrafts.Inyear2010,the
companygotDirectorateGeneralofCivilAviation(DGCA)nodetooperateonafew
selectedinternationalrouteslikeDubaiandSingapore.
Sincecommencement,theSpiceJetshasbeenfollowingitsstrategytooffersecure,
unfailingtravelatlowcostfromonepointtoother.Ithasbeenefficientlyutilizingall
itsresources,keepingallprocessessimple.SpiceJethasbeenavoidingspendingon
factorsthatarenotrelatedtotheelementarypurposeoftravel.Theairlinehasbeen
offeringthedynamicfarestoitscustomers,keepingthesafetyandcomfortofits
passengersatastandardlevel.
SpiceJethasbeenoneoftheintensivelowcostcarriersintheairlineindustry.Ithas
beenpositionedtomakeprofitseveninafluctuatingindustryscenario.Ithasbeen
revisingitsfleetsizeinordertomanagecostsinefficientmanner.Ithasbeenusing
Boeing737800andBoeing737900ERfordomesticroutesandinternational
destinationsrespectively.Inyear2011,itaddedBombardierQ400aircraftstoitsfleet
grouptoincreaseconnectivitytoTierIIandTierIIIcities.Inyear2014,itadded
MuscatasforitsinternationalrouteandDharmashalaforitsdomesticroute.
AccordingtoMarketLinereport,currentlySpiceJethasafleetsizeof58aircraftsthat
operatesacross51destinations.Ithasbeenshowingaphasedsizeexpansionof
capacityfromFY05toFY15[Exhibit1].
AsperSpiceJetsannualreport,itsoperatingrevenuehasgrownat12.56percent
[Exhibit2]fromthefinancialyear(FY)1314toFY1415,whichispredominantly
drivenby6.2percent[Exhibit4]surgeinoverallpassengertraffic.Theincreasein
passengertrafficincludesdomesticpassengertrafficandinternationalpassenger
trafficthathasbeengrowingby3percentand98percentrespectively.

Theavailableseatkilometer(million)andflightsoperatedhasbeenincreasingfrom
FY2011toFY14.AccordingtoSpiceJetsannualreport,Thesetwocomponents
havebeengrowingatanaveragerateof22.15percentand32.16percent[Exhibit3]
respectivelybecauseoftheintroductionoflatestBoeing737aircraft.
Accordingtocompany,ICICIdirect.comResearch,SpiceJetspassengertraffichas
grownwithaCAGRof23.3[Exhibit4]percentduringFY0914ascomparedto
overallindustrypassengertrafficCAGRof9.17[Exhibit4]percentduringthesame
period.
AccordingtoCrisilresearchreport,thedomesticmarketshareofSpiceJethasbeen
varyingbetween17to19percent[Exhibit2]fromtheFY201011toQ1FY2014
2015.Themarketshareofitsinternationaloperationshasincreasedfrom1.9percent
inFY201213to4.5percentinFY201314[Exhibit2]becauseoftheadditionof
fewinternationaldestinationslikeHongKongandDhaka.However,themarketshare
hasdecreasedto2.7percentinQuarter1FY20142015[Exhibit2]
Theoperatingexpensesforthecompanyhavebeenincreasingovertheyears.Asper
companysannualreport,thetotaloperatingexpenseshasincreasedby25percent
fromFY13toFY14[Exhibit5].OperatingexpensescomponentslikeAircraft
delivery,maintenance,andleaserentalaircrafthaveseenmaximumsurgeinthecost.
Also,thenetprofitofSpiceJethasdeclinedtoanegative424.9percentinFY14from
FY13accordingtocompanysannualreport.However,theoperatingmarginhad
impactedbytheweekpassengerloadfactor(PLFs),around8percentsurgein
aviationturbinefuel(ATF)prices,andweakeningofcurrencyby12percentinFY
20132014fromFY20122013.Allthesefactorshavebeenaccountableforhigher
expensesoffuelandotherstructuralcosts.
SpiceJethasbeenimplementingbestinternalandexternalexercisesforimproving
productivityinworkperformance.Also,thecompanyhasastrongrelationship
betweenemployeesandinternalcontrolinprocessesbutthecompanyis

unsatisfactoryintermsofnetprofitandinthecourseofstrengtheningitsspotinthe
market.

Exhibits
Exhibit1
Numberoffleet
Year

FY

FY

FY

FY

FY

FY

FY

FY

FY

FY

05

06

07

08

09

10

11

12

13

14

11

17

23

26

30

34

42

58

Fleet
Coun
t

Exhibit2
OperatingRevenueandMarketshare
Year
Operating

FY11

FY12

FY13

FY14

Average

10467

39433

56007

63042

276.73

42.03

12.56

110.44

Market

(paxkm)

share
20
1.9

19
4.5

19
2.7

18.75
3.03

Revenue(INR
million)
%Increase

Domestic
International

17

Exhibit3
AvailableseatkilometerandFlightoperatedperyear
Year
Availableseat
kilometer
(million)

FY11
10467

FY12
13717

FY13
16338

FY14
19003

Average

Percentage
change

Flightoperated 53963

Percentage

31.04

19.10

16.31

22.15

81139
50.36

109267
34.66

121788
11.45

32.16

change
Exhibit4
Passengertraffic
Year
Overall

FY9

FY10

FY11

FY12

FY13 FY14P

CAGR

industry

396

452.8

543.1

616

604.5

614.4

9.17%

SpiceJet

41.1

57

72.8

92.7

112

116.9

23.30%

Exhibit5
OperatingExpenses
Operating

FY2014(Rs

FY2013(Rs

Percentage

Expense
Aircraftfueland

Million)

Million)

change

32,526.60

28,033.15

16%

10,531.74

8,081.02

30%

9,932.53

6,737.56

47%

4,740.10

3,540.11

34%

741.84

571.03

30%

291.48

80.04

264%

453.91

215.67

110%

oil
Leaserental
aircraft,
Aircraft
maintenancecost
Landing,
navigation&
airportcharges
Operating
softwarecharges
Aircraftdelivery
andredelivery
costs
Otheroperating
expenses

Exhibit6
Comparisonofnetprofits
Year
NetProfit
Percentage

FY11
1012

FY12
6058

FY13
1911

FY14
10032

change

698.60

68.45

424.96