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SpiceJet orders 42 Boeing 737s in $4.4-bn deal

Business Standard:  March, 2014

Mumbai: Low-cost airline SpiceJet is revamping its network strategy to save costs and improve yields. The measures include closure of five-hour or longer international flights and deploying aircraft on shorter routes which would help increase revenue.

On Wednesday, the Sun group-controlled airline signed a $ 4.4-billion deal for 42 fuel-efficient Boeing 737 Max planes. The planes would be delivered from 2018 onwards. These would be financed with a sale and leaseback model.

“We are looking at every aspect of procurement. We are introducing a new schedule and changing flight patterns which will improve productivity of pilots and crew by 20 percent. We are replacing aircraft seats with lighter seats, which will reduce aircraft weight by upto one tonne. Our own time performance has improved. We have also intensified our marketing efforts and this has showed results,” said SpiceJet chief operating officer Sanjiv Kapoor. Amongst the routes it has dropped include Delhi-Guangzhou and Delhi-Riyadh, both over five hours long, and is replacing them with shorter flights.

Kapoor said he wants SpiceJet to be an ultra low-cost airline but admitted that managing costs in India was a challenge.

Currently, SpiceJet has a fleet of 56 planes comprising 41 Boeing 737s and 15 Bombardier Q400 turbo year 737 prop planes.

The airline would induct five Boeing 737 each till 2017.

SpiceJet has been facing financial turbulence with high operating costs leading to losses. In the last couple of months, the airline has been launching discount offers which many industry experts say is an indication of cash flow problem.

However, Kapoor said the offers had significantly improved the unit revenue of the airline in last two months in comparison to the same period last year. (A unit revenue measures the cash earned by an airline divided by total capacity). He said the discounts were offered for travel periods of 30 days and beyond and there were no discounts for last minute tickets.