SpiceJet: Leading the Unbundling Movement towards absolute no-frills

09 Saturday May 2015

Posted by theflyingengineer in Airline, SpiceJet

Tags

2015, Air, allowance, baggage, charge, check, circular, In, no, Seats, Spicejet, transport, unbundle

SpiceJet goes loud on some developments, and silent on the rest. What SpiceJet has done in the last few weeks is to unbundle as much of its services as possible, to find multiple ways in which the airline can make money.

Tony Fernandes (Group CEO, AirAsia) and Mittu Chandilya (CEO, AirAsia India), have been fighting for unbundling of services for long. In fact, when AirAsia launched a year ago, it charged passengers for check in baggage. DGCA interference, reportedly driven by pressure from other airlines, ensured that the airline provided a minimum free check in baggage service: 15kgs per passenger. Tony Fernandes regarded this move undemocratic. He had a point: The 15kgs of baggage did not come free, but was included in the airfare, unknown to the passenger. This only meant that every passenger was forced to pay for a baggage service that he or she may not opt for. Business travellers usually have no check-in baggage.

Air Transport Circular 1 of 2015, dated 24th March, 2015, seems to be an outcome of the constant requests AirAsia India has made to the ministry. The DGCA now allows airlines to charge for all seats that are pre-booked. Previously, this was limited to just 25% of the seats and excluded the middle row seats. The new circular also talks about “Check-in baggage charges” being unbundled. Although this was present in the previous circular, upon which AirAsia India acted, DGCA had the final say. Things seem to have now changed.

SpiceJet is the first airline to have stealthily implemented the circular to the fullest. All the seats on SpiceJet’s aircraft – Bombardier Q400 & Boeing 737, are chargeable when pre-booked, which wasn’t the case earlier.

Every Seat Pays

On the Boeing 737-800s (The airline flies 16 B737-800s and 1 737-900, besides three wet-leased Boeing 737-800s which have no SpiceMax extra legroom rows), the middle seats on rows 6 to 13 are charges at INR 100. The window and aisle seats are charges INR 300. Seats on the first five rows are charged INR 1,000. Emergency exit rows are charged INR 600. From rows 16 to 31, middle seats are charges INR 50, while the aisle and window seats are charged INR 100.

This allows SpiceJet to potentially generate an additional INR 56,400 per Boeing flight. Assuming a flight with 80% load factor has 25% of its passengers pre-booking their seats, this is INR 11,300 per flight. With this assumption, and a maximum of 129 Boeing flights in a day, SpiceJet may realise around INR 14,50,000 revenue per day from selling seats on Boeings alone.

On the Q400s, (The airline flies 12 -13), there are no middle seats. Row 1 (two seats) and Row 2 (right two seats) are SpiceMax seats, charged at INR 500. All other seats upto and including row 6 are charged INR 200. The rest of the seats in the cabin are charged INR 100.

This allows SpiceJet to potentially generate an additional INR 11,200 per Q400 flight. Assuming a flight with 90% load factor has 25% of its passengers pre-booking their seats, this is INR 2,520 per flight. With this assumption, and a maximum of 162 Q400 flights in a day, SpiceJet may realise around INR 4,10,000 revenue per day from selling seats on Q400s alone.

Together, the airline may, on average, generate 18,66,000 per day from selling seats. Over a month, this will be sufficient to pay almost two Boeing 737s’ dry lease.

No free check-in baggage

With SpiceJet’s “#Travel Light, Save More” offer, announced on April 27th, SpiceJet offered 1,50,000 seats on sale. The tickets for these seats were on the condition that a passenger did not travel with a check-in baggage. The offer was extended, adding an additional 100,000 seats. In total, SpiceJet offered 250,000 seats for sale with high confidence that these passengers would not have check in baggage.

With 15Kg per passenger not occupying the cargo hold, the airline has saved 3,750 tonnes of cargo hold weight. At an assumed average cargo rate of INR 20,000 per tonne (we’ve earlier determined this average to be slightly higher), this allows the airline to ‘sell’ INR 7.5 Crore worth cargo space/weight to its cargo handler, Sovika.

If however any passenger chooses to check in their baggage on these tickets, the airline’s T&C requires a flat fee of INR 750 to be paid for upto 15kg. This is the first example in India where a passenger is not granted complimentary 15kg check in service, but has to pay for “any” check in baggage.

This may be SpiceJet’s move in evaluating demand for such tickets. Perhaps, if proved successful, the airline may implement a policy of paying for every check-in baggage.

Other unbundled services

SpiceJet also charges for priority check in, Meal (hot meals – 737s and cold sandwiches – Q400s), excess baggage slabs, a ‘Meet and Assist’ service, and “SpiceAssurance”.

Priority Check-in charges a passenger INR 200. Hot Meals on Boeings are charged at INR 315 when pre-booked and INR 350 when bought on board. On Q400s, pre-booked Sandwiches are available for INR 200, and INR 220 when bought on board (the illustration for the Q400 meal is misleading as it shows steam coming from the plate that has the sandwich, which is not true. The sandwiches are cold). The SpiceAssist service comes at INR 500 per passenger (assistance from the SpiceJet staff at the airport).

All these services are ‘opt-in’ services, as mandated in the DGCA circular (a passenger needs to check the box associated with the service. By default, there must be no service pre-selected). However one service, the SpiceAssurance which charges INR 35 per passenger is pre-checked, which may not be the right thing to do. By paying INR 35, SpiceJet offers passengers a voucher of INR 500 is the flight is delayed by 1 to 2 hours, and INR 1000 if beyond 2 hours. This also offers limited baggage loss reimbursement.

This, in our personal opinion, is a poor move. Firstly, this is an opt out service. Secondly, a passenger has to pay for his own compensation for a delayed or cancelled flight. Previously, the airline offered this compensation for free, more. Third, the compensation is in the form of a voucher, which forces the passenger to book on SpiceJet to avail the compensation as a deductible from the next travel fare. Fourth – the voucher is valid for 90 days only.

Passengers who miss this INR 35 on the SpiceJet website (not offered through OTAs) will together contribute INR 19,30,000 to the airline, per month (assuming 10% bookings are through the website, and all these passengers miss or choose to ignore the INR 35 charge).

For a limited period, opting for a SpiceMax seats entitles a passenger to a complimentary meal. However, the airline allows for a meal to be chosen as well. This means that a passenger pays for a meal that he is entitled to. This seems to be a glitch in the system.

These small little things add up to big money! SpiceJet, we hope, corrects the ‘hot sandwich’ and SpiceAssurance.

Moving towards absolute no-frills

SpiceJet is the first to act like a ‘true LCC’ in India. IndiGo, Go Air, and surprisingly – AirAsia India, are yet to follow with seat selection and no-free check in baggage. On one hand, these moves pitch SpiceJet as a LCC (we now don’t believe in the term, we prefer no frills carrier), and on the other hand, the SpiceMax seats with good legroom and complimentary meals lend it a different image: of good premium economy luxury. Same brand, two images. Does it lead to brand confusion? We think so.

A twisted tale of Air and India: Pax Exp

09 Saturday Nov 2013

Posted by theflyingengineer in Operations

≈ 4 Comments

Tags

787, A320, Air, Airbus, Cost, Experience, fare, Flight, In, India, Passenger, Service

A paying passenger’s experience of a mix of the good and bad of Air India, and thoughts on what gives passengers enough to talk so much about the airline, and how the airline makes things difficult for itself.

4^th November saw me flying Bangalore to Bhopal via Delhi, with confirmed tickets for my return on the 8^th of November.

On the 3^rd, I had web-checked in, and changed my assigned 20J to 17J. The nine abreast cabin promised me the Boeing 787 Dreamliner, and although I have been on board, I hadn’t got airborne on one. I was excited with the thought of experiencing the cabin’s low noise levels and comfort.

The next day, at the check in counter, the check-in staff cleared my e-ticket with seat 17J. Upon a friend’s insistence, I asked the staff if we had a Boeing 787 operating as Air India 505 to Delhi. “Yes sir, it’s a Boeing 320”. “Excuse me?”. “Wait sir….it’s a…sorry…Airbus”. “How did you issue me seat 17J, then?” “Sorry sir (taking my boarding pass and scratching out my seat)…it’s 12F for you!”.

VT-EDD, a 3 year 8 month young Airbus A320 flew us from Bangalore to Delhi. The in flight meal was not palatable, and that left the tray untouched and me hungry. The cabin was tidy, but some of the in-flight entertainment screens weren’t working. Most of the seats were empty: the loads were very low, and that allowed me a “54” inch wide seat in economy: 3 X 18” seats all for myself. Upon landing at Delhi, I quickly grabbed a sandwich at Costa Coffee, and proceeded to board AI634 to Bhopal.

AI634 was operated by VT-SCI, a 6 year old Airbus A319 that was kept in a very bad state. The cabin was dirty, the wings had paint chipped off at places, and fluid stains running across the wing. The male cabin crew wasn’t very pleasant, and the “snacks” served on board wasn’t great, either.

Both flights operated on time, but the food, aircraft cleanliness (or the lack of it), and the attitude of the cabin crew left a bad taste.

On the 8^th, I was at Bhopal airport, and a scheduled 18:00 local departure on AI633 to Delhi was revised to 18:35. The Bhopal-Delhi flight has a planned block time of 01:15hr. All passengers had boarded VT-PPX, a 3year 6 month old Airbus A321 part of the “Praful Patel” series of Airbus airplanes. At 18:52, cargo was still being loaded. My connecting flight to Bangalore from Delhi was scheduled to depart at 20:10: earlier than we could reach Delhi, and I was braced for some chaos at the airport.

The in-flight “snacks” consisted of two butter cookies (very good, I must say), and tea/coffee. The staff was very, very courteous. The Cabin Crew in charge managed the show very well, coordinating between the pilot and anxious passengers who had connecting flights that were scheduled to depart before we could land at Delhi. Extreme patience was shown, and nobody: neither the passengers nor the cabin crew had an opportunity to lose their cool.

Upon landing at Delhi, ground staff very clearly called out for those who were headed to Bangalore. Three ground personnel coordinated very well, taking care of 10 of us who had to make it to the Bangalore flight that was waiting just for us to board. Over the radios, the baggage’s were discussed, and although tension prevailed in their voice, they got us through service stairs out of the terminal, onto the apron and into an apron shuttle, and back up via service stairs to the airbridge that led us to VT-EDC, aged the same as VT-EDD, operating as AI504 to Bangalore.

We got in, the doors closed, the cargo was loaded, erasing all apprehensions of leaving my bags behind, and at around 20:40, we pushed out of the gate, picking up 30 minutes of delay.

On board, the staff was very patient and courteous. My IFE was working, but my earphones were missing, so I called them once. I had a terrible ear block, so I troubled the crew many a time thereafter for water that allowed me to gulp fluids and help equalize the pressure in my eustachian tube.

And oh, the meal. I was hungry like crazy, and the paneer-rice-dal combination seemed fresh and was at the right temperature. This was accompanied with vegetable salad, and an Indian sweet dish: kheer. The bun was soft, and the butter softer, making the spread easy. It was a classic AI spread, but the spread was good.

The IFE worked well. There were about 4 channels: News, A retro-Hindi film playing, the 2013 “Kai Po Che”, and the 2010 “Wall Street: Money Never Sleeps”.

I was woken by a cabin announcement. My seat, 15A, gave me a good view. Visibility at Bangalore was excellent, and I could see the airfield (identified by the white / green beacon) flashing in the distance. A Boeing 737 could be seen on short finals, as we were somewhat on the downwind leg. There was something magical about the combination of engine noise, great visibility, and clear skies.

We landed at 23:04, with a 20 minute delay. The flight crew had enroute made up for about 10 minutes of the delay.

This time, I walked out of the airline feeling real good about the aircraft cleanliness, service, and on-board meal.

Giving food for talk.

This got me wondering: The reason my client put me on an Air India flight was because of its fares: it was the lowest, and the airline still offers some of the lowest fares. While that should be a reason to smile and not bother about anything else, the very fact that one is “entitled” to a complimentary meal / snack on board results in expectations, and if it turns out to be bad, it leaves a bad impression. When a passenger sees an in-flight entertainment screen in front of his seat, his expectation is that it must work and entertain him. The same passenger wouldn’t mind staring at a blank seat on a low-cost carrier, but when his IFE isn’t working while his co-passenger enjoys a nice movie, it leaves a bad impression. When the aircraft is dirty, the windows greasy and the seats in a bad shape, it leaves a bad impression.

Making it difficult for itself.

Air India offers some of the lowest airfares, provides in-flight meals to all at no extra cost, usually has a very courteous cabin crew (many others find them to be the best in the country, in terms of approachability and service attitude), and has a good safety record. Yet, when the freebies fail to met expectations, anti-airline sentiments set in. These freebies cost the airline money, and the passenger nothing; yet expectations are very, very human. India is a cost-conscious market: Almost all domestic passengers do not buy an airline ticket for the in-flight entertainment, cabin service, the on-board meal, or the aircraft cleanliness. What matters most, to most, is something simple: on time performance.

Probably another way in which the airline can turnaround, make money and improve passenger satisfaction? Give them lesser to expect. Knock off the IFE, and the in-flight free meals. Passengers will soon get accustomed to paying for a meal and having nothing but sleep to engage themselves with. And they will continue to fly for the low fares. If the airline competes with low cost carriers and offers low fares, it may as well change its operations to low cost.

Like IndiGo, which has nothing to offer on board, yet has absolutely clean aircraft and flies with one eye on the watch. And nobody complains.

After all, when there is nothing to expect, there is nothing to disappoint.