RESEARCH PROJECT-II
ON
“SPICEJET”
REPORT SUBMITTED TO
ITM BUSINESS SCHOOL, WARANGAL
SUBMITTED BY:
VARUN KUMAR VANAMALA
(ROLL NO: 40)
UNDER THE GUIDANCE OF
[Link]
INSTITUTE OF TECHNOLOGY AND MANAGEMENT
(RECOGNISED BY AICTE)
History & Evaluation
Earlier known as Royal Airways, SpiceJet is a reincarnation of ModiLuft,
one of India’s first post-deregulation airlines, launched in 1994 and shut
down in 1996.
SpiceJet was launched in May, 2005, and is being promoted by Ajay Singh
and the Kansagra family.
The goal of the airline is to compete with the Indian Railways air
conditioned coaches and, obviously, offer a better deal to its passengers.
SpiceJet aircraft are named after spices.
In 2009, SpiceJet won World Travel Market Award.
By 2008, SpiceJet became India’s second-largest low-cost airline in terms of
market share.
In October 2010, after SpiceJet was allowed to commence international
flights by the Airports Authority of India, the first international flight took
off from the Delhi to Kathmandu, followed by flights from Chennai to
Colombo.
In April 2011, SpiceJet chose as the first and primary base for its new fleet
of Bombardier Q400 NextGen aircraft Hyderabad’s Rajiv Gandhi
International Airport, from where it launched flights to Aurangabad,
Belgaum, Bhubaneswar, Goa, Indore, Madurai, Mangalore, Nagpur, Nasik,
Raipur, Rajahmundry, Tirupati, and Vijayawada.
In early 2012, SpiceJet suffered losses as fuel prices were reported to have
increased by as high as 90%. The money spent on fuel exceeded well over
50%, spiraling the airline into losses.
In December 2013, SpiceJet launched its first interline agreement with
Tigerair. For the moment, interline booking can only be purchased at
[Link].
For the month of December 2013, as per DGCA statistics, SpiceJet was #1
in on-time performance. On-time performance of scheduled domestic
airlines is computed by the DGCA for six metro airports (Bangalore,
Chennai, Delhi, Hyderabad, Kolkata and Mumbai).
In March 2014, Spicejet signed a deal with Boeing for delivery of 42 737-8
MAX aircraft.
In August 2014, SpiceJet introduced SpiceMAX, a new product that offers
customers a lot more comfort and convenience for little more money:
SpiceMax seats with with at least 6 inches more legroom compared to
standard seats and priority check-in at dedicated SpiceMax counters at major
airports. With this product, SpiceJet became the only low-cost airline in
India to actually offer greater legroom and comfort in seats that are marketed
and sold as “premium” seats under various names. Boeing 737 aircraft will
have 30 SpiceMAX seats (first five rows), and Bombardier Q400 aircraft
will have 4 SpiceMAX seats (the first row).
In June 2015, SpiceJet unveiled its new logo, with a new tagline – Red. Hot.
Spicy. All SpiceJet aircraft are named after an Indian spice.
In 2016, SpiceJet launched SpiceClub, a prepaid cum loyalty card, the first
of its kind in Indian aviation industry, wherein members are offered
opportunity to save money and also get rewarded while spending with the
airline. SpiceJet also opened new premium lounges at Guwahati, Jaipur, and
Varanasi airports.
In 2017, SpiceJet placed a firm order for 100 Boeing B737 MAX 8 aircraft,
taking its total order to 155 Boeing B737 MAX 8 aircraft. The airline also
ordered 25 Bombardier Q400 NG turboprops, with purchase rights for 25
additional aircraft. SpiceJet will be the launch customer for the high-density
90-passengers Bombardier Q400 model. The airline plans to grow its fleet to
200 aircraft by 2020 and expand regionally.
In March 2018, SpiceJet was awarded India’s Best Domestic Airline award
at the Wings India Awards for Excellence in the Aviation Sector organized
by the Government of India, Ministry of Civil Aviation, and FICCI.
No deadly incidents involving SpiceJet aircraft have been recorded so far.
Product/Service Portfolio of Spicejet
Destinations:
As of February 2019, SpiceJet operates 306 flights daily to 35 Indian and 6 international
[Link] operates hubs at Delhi and Hyderabad, which is the primary base for its fleet of
Bombardier Q400 [Link] completing five years of flying, SpiceJet was allowed to commence
international flights by Directorate General of Civil Aviation on 7 September 2010. SpiceJet launched
flights from Delhi to Kathmandu and Chennai to Colombo and the first international flight took off on
7 October 2010 from Delhi.
Fleet:
In June 2018, the airline operated the following aircraft:[27]
SpiceJet Fleet
In Order Passenger
Aircraft Notes
Service s s
Boeing 737-700 3 — 149
Boeing 737-800 28 — 189
Boeing 737-900ER 4 — 212
Boeing 737 MAX 8 1[28] 154[29] 189 Deliveries starting August 2018[30]
Bombardier Dash 8 Q400 23[31] — 78
Bombardier Dash 8 Q400 Launch customer of high-density 90-
1[32] 24[32] 90[32]
NG passenger model[32]
Cargo fleet
Deliveries through 2022
Boeing 737-
1[33] 20 Cargo Launch customer in India for the 737-700
700BCF/BDSF
freighter[34]
Total 61 198
SpiceJet Boeing 737-800
SpiceJet Boeing 737-900ER
SpiceJet Bombardier Q400
In January 2017, the airline placed a firm order for 100 737 MAX 8 aircraft, and
revealed itself as the airline behind the 13 MAX 8 aircraft previously attributed to
an unidentified customer, taking its total order to 155 MAX 8 aircraft with
purchase rights for 50 additional MAX 8 and wide-body aircraft. The budget
carrier plans to grow its operational fleet to 200 airplanes by the end of the decade
and expand regionally with the new 737 MAX family of airplanes.
In June 2017, the airline signed a letter of intent with Bombardier at the 2017 Paris
Air Show, to purchase up to 50 Q400 aircraft, catering to growth in passenger
traffic arising from its participation in the Indian government's UDAN regional
connectivity scheme.
Services
SpiceJet has moved away from the typical low-cost carrier service model
of economy class-only [Link] airline offers premium services under the
name SpiceMax, whereby passengers can obtain additional benefits including pre-
assigned seats with extra legroom; meals on board; priority check-in and boarding;
and priority baggage handling; at a higher [Link] SpiceJet does not
provide complimentary meals in any of its flights. It does sell full in-flight meals
on some [Link] does not operate any frequent-flyer programme and does
not provide any in-flight entertainment options.
Partnerships
SpiceJet has partnered with Tripfactory for selling holiday packages on its
platform.
SpiceXpress
SpiceXpress is the air cargo division of SpiceJet. The cargo airline was launched in
September 2018 and commenced services on the Delhi-Bengaluru-Delhi route with
a Boeing 737-700.
SpiceXpress began services between Guwahati and Hong Kong on 19 January
2018 becoming the first airline to operate freight services between Northeast India
and Southeast Asia.
Sales growth history
Total revenue increased due to better operating performance in terms of load
factor, average fare etc. and additional flights introduced.
The impact of our sustained efforts is evident in our performance. Operating
revenues for the year increased 26% from C61,913 million in FY 2016-17 to
C77,951 million. Earnings before interest, taxes, depreciation, amortisation, and
restructuring or rent costs (EBITDAR) grew 18% to C18,739 million. Earnings
after Tax (EAT) grew 32% to C5,667 million compared to marginal decline in the
previous year. This was achieved despite a surge in fuel prices as we worked on
improving efficiency and bringing down costs. Resultantly, our EAT margins were
higher by 31 basis points to 7.27%. Noteworthy here is that this performance was
achieved organically. On one hand, we nurtured growing passenger traffic by
adding capacities and on the other hand, we kept maximising non-aviation
revenues. This reiterates that our growth is sustainable. We addressed the growing
traffic by adding 112 new flights and adding 36 new routes having pent-up
demand, including four of the six UDAN destinations, won in the previous year.
Resultantly, our capacities (Available Seat Kilometre) increased 19% contributing
to a 27% growth in passenger revenues to C74,095 million. We have bagged
another 20 routes under the UDAN Round II and expect to operationalise them in
the next fiscal. For non-aviation revenues, our venture into fashion business and
focus on providing value-added services to passengers are seeing encouraging
traction. During the year, we launched a series of niche products for various
services as well as initiated one of the largest loyalty programmes to increase direct
bookings and boost sales of ancillary products. This led to a 12% growth in
ancillary revenues to C3,139 million.
Market shares, competitors market share
SpiceJet is a budget airline company in India with a market share of 13.2 percent. It was founded
in 1993 as ModiLuft and started operations on 5th May, 1993.
The SpiceJet Airlines serves in key cities of India such as Pune, Chennai, Ahmedabad, Goa and
so on. Previously, it was owned by the NRI group and it was acquired by the media king
Kalanithi Maran. However, Maran sold his shares back to Ajay Singh in 2015.
Facts about SpiceJet
Revenue: Rs. 7933 billion (US$1.2 billion) (FY 2018)
Net income: Rs. 557 billion (US$81 million) (FY 2018)
Total Assets: Rs. 4109 crore (US$600 million) (FY 2018)
Employees: 6902 (2017)
Fleet Size: 58, Orders: 169
Total man power and organizational structure
As the Organisation embarks on its next growth phase, it is imperative for the
Company to build Leadership bandwidth, Organisation structure and People
processes, to keep pace with the high energy Operational delivery at a high level of
Operational excellence. During the year under review, SpiceJet continued to attract
critical talent as a result of which the overall employee strength increased from
6,902 in April 2017 to 8,447 in March 2018. Structured and well calendarised
“roadshows” for Inflight and Flight Operations ensured continuation of the
required numbers. The Company ensured 75 internal job postings. Resultantly, the
existing workforce of SpiceJet found avenues to grow professionally outside their
regular work areas. The quarterly individual achievement recognition programme
to identify the “Spice Stars” was launched during the year with a lot of fanfare. An
automated process ensured timeliness and control on the entire flow of the
programme. A large number of people got recognised and strived harder to find a
place on the pedestal. The “Long Service” award continued with increased fervour,
with 950 more people coming within this ambit. The Company continued to
promote the culture of equality and diversity with more than 30% of women being
recruited in its workforce. Two complete batches of 29 lady pilots were hired to
reinforce the organisational commitment to this direction. Moreover, a full-time
psychologist was brought onboard to provide emotional counsel to deal with
workplace-related issues and personal challenges.
Chief Executive Officer
At the top of the hierarchical set is the chief executive officer of Spicejet
Company. The whole management and execution function of the company
performs under his supervision. Under him there are some other office holders,
who help him in various functions of the company, be it policymaking, financial
decisions or legal problems.
Vice President (legal) and Co. Secretary
The second most important post in the organization is that of the vice president
(legal) and co. secretary. Apart from being the co. secretary, this post holder is
supposed to look after the legal affairs system of the company.
Secretary
The next post of importance in the hierarchy is the secretary of the company. At
present the same person who is in the post of vice president (legal) and co.
secretary is holding the post. The secretary too plays an important part in making
the policy decisions of the company. Since he is also handling the legalities of the
company, it is easier for him to look after all the legal issues concerning the
company policies.
Independent Director
In the company hierarchy, this post is also an important one. At present, there are
two independent directors in the Spicejet Company. In the management, they too
play important parts.
Chief Financial Officer
Financial matters are of extreme importance in any company, and Spice Jet is not
different to any other company in this matter. Thus, the post of chief financial
officer is also of vital importance. It is the duty of this officer, to take care of all
the plans, and actions about finances. There are several employees working in the
financial section of the company and the chief financial officer might oversee their
work.
Under this group of people, who enjoy the highest rank in the company, are
different other employees, ground staff, flight crew etc, who help to run the
company properly. Without their active participation, it is impossible to run a
company successfully. There is also a board of directors in charge of various
functions of the company, and heads of departments. Together they form the staff
network of the company. This is a hierarchical set up of Spicejet in short.
BCG Matrix
In the early 1970's,BCG Matrixfirst propounded by Bruce Henderson of the BostonConsulting
Group. It is also known as BCG matrix,Boston Consulting Group Matrix, BCG Growth-
Share MatrixorMatrix Quadrants.
Using theProduct Portfolio Matrix approach,a company classified all itsSBUsor
Products/Markets SPICEJET AIRWAYS ording to Growth-Share Matrix. Therefore,it is best
describe as Portfolio planning [Link] this Matrix Quadrants, the plate is divided 4 categories
namedA. StarB. Cash CowC. Question Mark D. DogThe division is based on Market Share
and Growth rate. A brief discussion comesfollow:
A. Star:
Leader [i.e. high market share] of high growth market is called [Link] SBUs are net user of
cash, because they always require heavy investment tofinance rapid growth and to sustain
market share. When the product comes to maturestage, then the growth slow down and they
turn to cash cow.
B. Cash Cow:
Cash cows are low growth but high market share (Market leader)businesses or [Link]
high earnings, coupled with their depreciation, represent high cash inflows andthey need very
little in the way of reinvestment. And thus, they are the net provider of cash. Surplus cash are
used for Research and Development and to support other SBUsthat need investment.
C. Question mark:
Products in a growth market with low market share arecategorized as Question [Link]
of growth, these SBUs require a lot of cash to hold their market share and letalone to increase it.
If nothing is done to increase the market share, a Question mark will simply absorb large
amount of cash in the short run and later, as growth slowdown, become a dog. Thus, unless
something is done to change its perspective, itbecomes a cash [Link] has to decide
which question marks should try to build into stars andwhich should be phased out.
D. Dog:
Dog are low growths, low market share SBUs. They may generate enoughcash to maintain
themselves, but do not promise to be large source of [Link] often case, it should be liquidate
and try with Question mark SBUs [Link] Growth Rate and Relative Market
Share play important roll inBCG Matrix. Market Growth Rate is the measure of industry
attractiveness and Relative MarketShare is the measure of Competitive advantage. Therefore,
these two are mostimportant factors to consider organizations profitability and strategic plan.
SWOT ANALYSIS
STRENGTH:-
Second in LCC segment
First to target the middle class.
Using similar kind of plane.
Reputation
WEAKNESS:-
Very limited advertisings
Reached at the threshold of cost efficiency
Small fleet structure
Small load efficiency compared to Air Deccan / Indigo
OPPORTUNITIES:-
Extensive network to capitalize Spicejet Cargo business.
Plenty of scope for expansion of operations.
Strengthen its position in Chartered flight segment.
Could start “Contractual Employment”.
THREATS:-
High attrition rate.
New entrants like IndiGo, Go Air and Air Deccan.
High Risk Perception.
Value Chain
Value chain analysis, the company is split into primary and support activities.
Primary activities arethose that are related with production, while support activities
are those that provide thebackground necessary for the effectiveness and efficiency
of the firm, such as HRM. The primaryand secondary activities of the firm are
discussed in detail below.
Primary Activity -11.806%
Support Activity -27.23%
Support Activity > Primary Activity
So it indicates that company is occurring loss.
Business Strategy
Spice Jet’s mission is to become India’s preferred low
-cost airline, delivering the lowest air fares with the highest consumer value, to
price sensitive
consumers. We hope to fulfill everyone’s dream of flying.
With India's economic and business growth, the percentage of traveling population
isburgeoning. More and more Indians are traveling for both business and pleasure
andeveryone needs to save both time and money. SpiceJet's vision is to address
that andensure that flying is for everyone.
-The power to fly for everyone
With a dynamic fare structure, SpiceJet offers fares that are affordable and
significantlylower than most airlines. With contemporary interiors, modern
graphics and vibrant
colours, SpiceJet is very much like today’s traveler
- practical yet stylish. A SpiceJetter will
feel ‘this is the smart, international way to travel, I've made the smart choice’.
SpiceJet is
committed to make sure you feel good at the end of a flight, arriving at your
destination -fresh and on time.
The power of technology
SpiceJet's new generation fleet of aircraft is backed by cutting edge technology
andinfrastructure to ensure the highest standards in operating efficiency. With
maintenancesupport by KLM and state of the art technology from world leaders
like Star Navigation,Russell Adams and Tech Log there will be no compromise on
safety, reliability or on-time
travel. The company has tied up with Navitaire the world’s renowned low
-cost support forreservations and revenue management. E-booking and e-ticketing
facilities are availableonline along with tele-booking.
The power of performance.
From aircraft to crew and ground staff the focus is on performance. Each SpiceJet
employeeis groomed to be smart, friendly, efficient and well-informed, ensuring
that any interactionwill make you feel welcome and looked after. Experienced
pilots, well-trained cabin crewwill make every flight a comfortable one. The
philosophy is no-frills but high-performance.
The power of safety
SpiceJet invests heavily in safety, impeccable maintenance and a high level of
[Link] pilots, engineers and maintenance crew go through rigorous
training and arehand-picked for their technical knowledge and expertise. So you
can rest assured that thereis no cut-back in this key area of modern day flying.
The power behind the power to fly
SpiceJet's key management personnel are all senior, seasoned professionals and
havesignificant international experience in both launching and managing low-cost
airlines. Withthousands of cumulative man hours in the industry, the management
is committed to bringto customers in India all the benefits of the global revolution
in the skies. SpiceJet aims tomake travel comfortable, affordable and refreshingly
efficient experience for all.
Competitors strategy
Indigo:
In the words of Rakesh Gangwal, Indigo is a ‘Strict low cost carrier’. So, across its value
chain activities, Indigo looks to cut costs wherever possible, without compromising on the
bare minimum services that has to be provided to its customers. Indigo has modelled its
business based on Ryanair and southwest airlines, some of the low cost carriers from the
western world, which have been performing impressively. Their primary goal is to serve the
routes where demand is high and profitability is high. They also operate on a hub and spoke
model enabling them to fly to different destinations across India. This leads to a high
utilization rates, which helps them, get higher profits.
Some of the other choices made by Indigo , that has already been explained in the value
chain analysis such as Young fleet, Standardized fleet, sale and lease back, high turnaround
time, Only economy class are some of the things that helps Indigo cut majority of its costs
and gain a competitive advantage vis a vis the other airlines in India. It can be deduced that
Indigo fits into ‘Cost Leader’ in Porter’s Strategic Positioning Model framework.
Air Asia:
AirAsia, relatively a new entrant in Indian Airlines industry already has its competition to
respond in all out price wars. The incumbent market leader, Indigo is not silent an observer
and is responding tooth and nail it to the aggressive strategies followed by AirAsia. Even Mr.
Fernandes, AirAsia CEO has acknowledged that Indigo is making life difficult for them.
Indigo has countered every move made by AirAsia in India, be it by cutting fares or adding
more flights on existing routes where AirAsia flew its own. On each new route started by
AirAsia, Indigo has followed suit, setting off a price war. Indigo also launched several flights
from the cities AirAsia was aiming at, looking to thwart the AirAsia’s efforts to tap niche
routes. When AirAsia announced a non-stop flight between Bengaluru and Chandigarh,
Indigo took off on the route before AirAsia could. Indigo has taken competition head-on, not
making it easy for new entrants.
Jet Airways:
-Removing a row to gain passenger space
-After having removed a row of seats from some of its planes to increase overall
leg room for passengers, Jet Airways (India) Ltd is using an innovative, three-
dimensional billboard campaign to sell the concept.
-Developed by Mudra Group’s outdoor unit Prime site, the Mumbai billboards
have images of two chairs sitting close to each other, and then one drifting on
railings to reveal the message: “We’ve removed a row to give you more space.”
-The row of seats has been done away with in Jet’s 737-800s series planes.
Removal of rows to create space for cramped passengers isn’t a new idea as many
airlines, especially in the US, have used similar tactics and messages to
differentiate their planes from rivals. Several other companies, such as auto makers
(with sections of cars) and even coffee companies (Bru used chairs and tables)
have used three-dimensional billboards to stand out.
