Acquisition, Airways, Bain, Co, Customer, Experience, Factor, Indigo, Kapoor, Load, Merger, Offer, Profits, Sanjiv, Spicejet, Tiger, Tigerair
This piece has 3 parts: the first entirely factual, the second, Spicejet’s offer and what it should do to make itself more appealing (based on actual feedback), and the third: a focus on Spicejet, its COO, and its investor: is a part factual and part well informed yet speculative section.
The Big Sale left no great Tale.
In the 3 months of February, March and April 2012, Spicejet had flown 838,911 empty seats that made up 25% of the airline’s average seat capacity in that 3 month period. Based on the airline’s past performance and future growth projections, 25% in that 3 month period, in 2013, was to have translated to 987,644 seats. Make that 1,000,000 (10 lakh) for the arithmophobic.
That’s the exact number of tickets that were on sale, mid January, for an all inclusive fare of INR 2013, during the airline’s Big Sale offer, valid for travel during February, March and April, 2013.
The numbers made sense; everyone was convinced, and the figures added up to a promise. The load factors were expected to lean towards 100%, by roping in travellers who otherwise would have preferred the Indian Railways. It should have made perfect sense.
But it didn’t. In that 3 month period, the airline flew 900,733 empty seats, 7% more empty seats than those in the same period, in 2012. Capacity had grown 17%, demand grew 20%, but the average load factor had grown a dismal 2.8% to 77.3%.
But did it have the effect of siphoning off passengers from other players, including its biggest, true low cost competitor, IndiGo? In the same period, Feb-April 2013, IndiGo’s capacity grew 24%, demand grew 27%, and load factors increased, eerily, by the exact same amount as Spicejet’s: 2.8%, to 82.7%.
And yes, both airlines flew 900,000 empty seats each in that 3 month period.
Focusing on the consistent, business traveller.
It’s that time of the year, again, and Spicejet has a new offer: the Spicejet Corporate Flyer Offer, which offers to corporate companies 1 free one way ticket for every 6 completed one way journeys and 2 free one way tickets for every 10 completed one way journeys, with applicable T&C. This year, until probably any other offer is introduced, the airline has shifted focus from the Aam Aadmi, and focused on Corporates.
Will it pay off? Maybe. But unlike targeting the rail-going population, the corporate traveller needs something more: good service. And from what we’ve been hearing, including from a top management guy from one of the world’s largest manufacturers of computers, with a strong India presence, the service needs a makeover.
Agreed, India is a price sensitive market, but it’s not always the fares and offers that attracts a passenger: promise must be met with delivery. Because everyone remembers the bad and not the good. And an airline wouldn’t want to risk that, if one of its passengers is a decision maker at a big, big company.
Pilot in Command: Sanjiv Kapoor
This small, yet deepened focus on the corporate traveller may be one of the changes brought about by the Sanjiv Kapoor guided airline. Sanjiv Kapoor, interestingly, was employed by Bain & Co for over 5 years, the last position that of a Principle. His profile spanned strategy, turn around, alliances, network planning, revenue enhancement, procurement, post-merger integration, and customer experience transformation.
His absorption into the company is very interesting. Customer Experience can do way, way better in the airline, and hopefully, he’s here to deliver. Alliances: he’s already entered Spicejet into an interline agreement with Tigerair.
And the most interesting part is here: procurement, and post-merger integration. Very surprisingly, Sanjiv appointed consulting Bain and Co. to restructure the airline’s network and return it to profitability. Sanjiv also held the position of Senior Director, Temasek Holdings for 1yr 8 months. Temasek Holdings, directly and indirectly through Singapore Airlines has a significant stake in Tiger Airways, which operates as Tigerair.
Some wonder if Spicejet hired Sanjiv, or Tigerair placed Sanjiv in Spicejet. The quarterly loss of Spicejet is eerily similar to that of Indonesian carrier Mandala Airlines, which was grounded in 2011, for a year, following debt related issues. The airline took to the skies again, reborn as Tigerair Mandala.
The winds point to Tigerair investing in the Indian low cost airline. The winds are strong and steady, and the dawn of 2014 will show us the airline and its investor, striped or not.