SpiceJet's Q400s Are Here to Stay

After Ajay Singh took over SpiceJet, media reports and general speculation said his revival plan included culling the 15 Bombardier Q400 regional aircraft from the fleet. The Flying Engineer learnt the opposite: SpiceJet's Q400s were staying.

Why a dual fleet makes sense in India

The industry generally believed a single fleet type was best for a low cost carrier, pointing to Southwest, Ryanair, AirAsia and IndiGo. The Flying Engineer had long held that a dual fleet was the better way to penetrate the Indian market, which falls into three broad groups of routes:

• Thick routes, long and short: mature and crowded markets such as Bangalore to Delhi (long) and Bangalore to Goa (short).
• Thin routes, long and short: evolving markets that are underserved or unserved, such as Bangalore to Chandigarh and Bangalore to Vishakapatnam.
• Thinner, short routes: markets that will not mature easily, such as Vijayawada to Hyderabad and Bangalore to Belgaum.

The last group does not mature easily because rail and road links between those cities are fairly good. Even so, a small segment of travellers will pay for the time and convenience of cutting an overnight journey to about an hour. At many of these places the runways had not been upgraded for larger jets, which made them suited almost only to turboprops like the ATR 72 (typically 72 seats) and the Q400 (typically 78 seats). Because these travellers value time and there is little competition, an airline like SpiceJet enjoyed good pricing power there.

The numbers

In Q2 FY15, SpiceJet's passenger only RASK (excluding ancillary revenue) was INR 2.74 per ASK across the airline, while the Q400s delivered INR 4.99 per ASK. The Q400's passenger only RASK was higher than the airline's average RASK including ancillaries, which was INR 3.26 per ASK.

In that quarter the Q400s flew only 8.13 percent of the airline's deployed capacity but brought in nearly 14 percent of total passenger revenue. The Q400s made up 30 percent of the fleet by aircraft count but only 14 percent of total seats.

What went against the Q400

The biggest drag was maintenance cost. The Flying Engineer understood this was a problem of the past, from the time when maintenance facilities were not available in the subcontinent. Perhaps the choice of aircraft was not right, but the dual fleet idea was not wrong.

If SpiceJet bounced back with new funds, it might need to rework the Q400 network a little and play to the aircraft's strength: feeding the mainline network with traffic from Tier III routes. That is one way a smaller player can survive, through differentiation and through monopoly or duopoly routes, when the established routes are crowded and margins are thin.

The days of a dual jet fleet, a mainline narrow body complemented by a regional jet, did not look far off either.