Keeping ever expanding destinations both domestic and overseas in mind, low cost carrier Spicejet has annonced biggest ever purchase order of 205 new aircraft from US commercial airplane maker Boeing valued at $22 billion (Rs 1,50,000 crore).
“Almost two year back the airline was on the brink of a closure and after that we not only nursed it back but now Spicejet has achieved seven consecutive quarters of profit, highest on-time performance and lowest cancellation rates; a record load factor of over 90 per cent every month for 20 months in a row – a feat that has no parallel in aviation history,” said SpiceJet Chairman and Managing DirectorAjay Singh.
“This order ends the era of turnaround and marks the beginning of a growth story for the next decade. This fleet acquisition provides SpiceJet the ability to capitalise on the robust demand forecast in the world’s fastest growing aviation market,” added Singh.
Actually, SpiceJet enhanced airline’s existing order of 55 aircraft with additional 100 firm B737-8 MAX and 50 purchase rights for B737-8 MAX and wide-body aircraft.
When asked about financing of the deal and its impact on debt to equity ratio, Spicejet Cheif said there would be no "equity dilution" and the balance sheet would be healthy.
“SpiceJet would explore different options for financing the deal and whichever option will give better rates, will opt for that. Sale and leaseback are a good option. We can also look at financing from Exim Bank. There are many options available with us. Moreover, the induction of the new aircraft, which burn 20 per cent less fuel, would help the airline reduce costs and enhance its ability to compete,” he added
“Booked in December 2016, the announcement includes 100 new 737 MAX 8s, SpiceJet’s current order for 42 MAXs, 13 additional 737 MAXs which were previously attributed to an unidentified customer on Boeing's Orders & Deliveries website, as well as purchase rights for 50 additional airplanes, said Boeing's Senior Vice-President Sales (Asia Pacific and India) Dinesh Keskar while talking about the Spicejet deal.
Delivery schedule of the Boeing aircraft starts from third quarter of 2018 and extends till 2024.
When asked about financing of the deal and its impact on debt to equity ratio, Spicejet Cheif said there would be no "equity dilution" and the balance sheet would be healthy.
When asked about the utility of long haul aircraft with the airline, Ajay said : We would also explore the possibilities of commencing low-cost long haul flights in future. We will study this... We are keeping the option open if we think in the future that we can run economically-viable and profitable operations.”
The airline is looking at the economics of wide body, low-cost long haul format while the kind of planes that can be used is to be decided.
"The narrow body MAX aircraft itself gives us bigger range... So now the four-hour flights can be five-hour flights and that opens up several new destinations to explore," he added.
Giving out the ecomomics behind the though he said that Indian market -- where there is a large population, increase in disposable income and forecast suggesting higher GDP growth -- there is very little reason why people would not want to travel to different parts of the world provided those flights come at a cost which is affordable".
"If you can stimulate that market with lower fares and that stimulation is possible only if you bring down the cost down on a unit basis. If we find that there is a model that works, we will certainly explore it," he opined.
He also drove home the point that the airline would not go crazy about its market share abd stressed that the focus is to grow in a responsible way and remain profitable.
"Market share will happen as we increase our planes and flights," he saidd.
As per the latest data available with aviation regulator DGCA, SpiceJet is at the fourth position with a market share of 12.8 per cent, a notch below national carrier Air India which had 12.9 per cent share at the end of November 2016.
Is the airline also planning well for Regional Connectivity Scheme, he answered in the affirmative and said: : We will help the Government in this plan as we know and understand that smaller cities offer better growth oppportunities but right this is not the focus.”