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Interview with SpiceJet CMD Ajay Singh

While the industry is suffering from overcapacity leading to low fares and bleeding books, SpiceJet’s CMD Ajay Singh, in an interview with The Indian Express, tells that the level of fares seen in the last quarter have been unsustainable and that airlines need to raise fares and pass on the additional costs they have incurred. Excerpts:

Will the airline allow phone calls within a flight?

We will have to see whether we allow phone calls or not. Certain decisions still have to be made but the aircraft is equipped with the satellite communications equipment required to provide broadband connectivity, the deal with the satellite space provider is in place. As soon as the government gives us permission to launch the service, we will do so.

Will the in-flight internet be fully complimentary?

Our thought is that we will start with a complimentary service. There are two models – either you fund it through advertising or you fund it through subscription. Our team believes that we start by funding it through advertising. It is going to be a revenue source for us and not only a cost head. Beyond a point, it can’t be complimentary. There will only be a basic package that will be free, which will essentially allow you to do WhatsApp and simple messaging and if you need more bandwidth than that, you will need to pay for it.

Who have you partnered with for SATCOM services?

Our satcom provider will be INMARSAT.

SpiceJet has been announcing premium offerings that typically full-service carriers do. Is there a shift in strategy from being a low-cost carrier?

For low-cost carriers it is incredibly important to increase ancillary revenues, especially at a time when external parameters are not going in our favour. To increase our ancillary revenues, we feel we need to experiment with our products. It’s not a question of low-cost versus a premium airline. We are low-cost because our cost is low not because our services are shoddy. The key in running a low-cost service is that the number of seats don’t change. In this case, we have adjusted to provide extra legroom for certain seats and the seats at the back are slimline so that there is legroom. We are not compromising on any economies of a low-cost airline because the basic economy comes from the seats that we have. For the seats that we have, we are trying to increase the ancillary revenues.

Would you say that there is a problem of overcapacity in the market?

Fares need to go up. Ultimately, capacity moderation is about fares. Fares need to go up and airlines need to be more responsible. By inducting aircraft we are actually bringing down costs, which is the other objective. At this time we need to bring down costs and raise revenue. Right now, airlines really need to pass on the additional costs they have incurred, which has been around 20 per cent in the last year or so in terms of rupee depreciation and rising oil prices. What happens sometimes is as airlines induct a lot of capacity, they suddenly find that planes are empty and in the quest to fill them they start filling them with lower fares. When aircraft come in, people don’t know what route to fly, so what happens is they deploy them on the same routes. Because of this there are 14 or 15 frequencies on a single route and when that happens fares come down.

Are the fares sustainable at the current levels?

The fares that have been offered over the last three months are certainly not sustainable. With festivals season coming in, I would expect that there will be an increase in fares.

Given the situation of the aviation sector in India, what do you expect the government to do?

We don’t want a bailout package. What we are requesting is that give us a level-playing field with our peers around the world, many of whom we are competing with. In none of these countries, is there a tax on aviation turbine fuel. Wherever there is marginal taxation, in those countries there is an input credit available through a GST-type regime. Secondly, there is no import duty on aircraft parts, spares, etc. We want that both these things should be addressed in India.

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