Turning over a new leaf – Spicejet revamps Q400 schedule

Spicejet started with rapid expansion, immediately after the induction of Q400s in 2011/12. This meant opening up new stations, many of which were single flight stations. This trend was seen for the B737 operations too with flights to Guangzhou – which were one of the early pull outs. The strategy was termed Blue Oceans by the then CEO – Neil Mills, but sadly it has not given the results it was expected to give.

The difference in salary paid to staff at stations which handle multiple flights a day and a single flight a day is very less, thus it makes sense to have as many flights as possible to each and every station in the network, and find a station which can support such operations, unless the station is such that it gives exceptional yields.

There is a lot to learn from Network Planning of IndiGo. Over the years, they have selected stations which let you launch flights from multiple destinations in their network. While this approach is considered to keep costs low, there is another benefit which lies on the Marketing and Sales side. By having more frequencies and connections, it is easy for the Sales team to get more and more travel agents on board and increase sales in a particular city, which in turn help shore up the load factors.

When the head winds started for Spicejet, the blame was being put on the Q400s and the dual fleet strategy. It was also reported that Ajay Singh – the new MD is not in favor of dual fleet strategy and would look at phasing out the Q400s. Thankfully, there is new lease of life, at least temporarily for the Qs and there were news items of the turboprop fleet being cash positive in Q1-CY15.

I have always felt that a dual fleet strategy will be helpful for Spicejet and be a differentiator. Spicejet should aim to be a JetBlue in India – a value carrier! And this is how they would be different from market leader IndiGo – which now commands a premium and with operational issues & lowest OTP of Spicejet mainly due to its B737 fleet, the airline will take a lot of time to regain business customers or high yielding passengers.

New Schedule

VT-SUA, one of its Q400 was written off after an accident in Hubli, getting the effective fleet strength to 14. The airline launched a revamped schedule on 1st of July which sees utilization of 13 aircraft.

The new schedule sees an increase in monopoly routes, including Jabalpur – Hyderabad, which is being operated for the first time, Jaipur – Udaipur which will make more sense in winter schedule than now and was tried by Kingfisher successfully in the past. The airline has also increased frequency on the Jabalpur – Mumbai and Jabalpur – Delhi sector, something which was planned from end of March but had to be postponed owing to the Hubli accident.

An aircraft like the Q400 is best utilized for high frequency shorter routes or low density medium routes or virgin routes with thin demand. From induction till this schedule, the Q400s went all over the place, from Indore, Bhopal, Aurangabad, Allahabad – places which today are not part of the route network of Spicejet.

A focused schedule

Prima facie, it looks like a lot of effort has gone into making this schedule. Cities like Jabalpur are in focus – typical tier II towns which have struggled for connectivity but shown good numbers at average yields, ignored by most.

I had last analyzed the Q400s of Spicejet in 2014 (The Q Story) and the numbers since then look more of a consolidation of operations – exactly what was being spoken by Ajay Singh.

The airline now flies to fewer destinations, but with higher frequencies. At few stations where the airline flies only one flight on the Q400s, the airline also flies on the B737s, although there will always be some exceptions. There are 10 sectors which are monopoly routes and 13 which are duopoly. This gives the airline better pricing capability and becomes immune to price pressure from competition. These comprise the low density medium routes or routes with thin demand. Few of the duopoly routes in the south are those where the airline competes with Air Costa and would benefit from higher brand recall, better brand, lower operating cost as compared to the Embraer’s and wider network reach.

The station selection has been such that these are not stations where IndiGo is present, making life a little simpler on the Sales & Marketing side.

Wet leased planes.jpg

Key Parameters

When I last looked at the schedule sometime in 2014, the average flight duration was around 1:25 which has marginally reduced now and the Qs operated to 29 stations. While the current count is 28 stations, earlier there were 10 destinations which had seven flights a week or less, this count is down to four and this is the consolidation which I have stressed upon in the paragraphs leading up to this point.

The utilization has also seen a marginal jump, while traditionally the Q400s were utilized between 9:35 mins to 11:00 depending on day of the week, the lowest is now 10:25. This calculation is based on 14 aircraft, where the average comes down. The airline operates 14 aircraft but only 13 rotations are operational.

There has also been an increase of 40 flights per week over the last year, taking the count to 808 right now making it an average of 8.24 when spread over 14 aircraft and close to 9 in actual, with 13 operating aircraft.

The airline now bases 4 aircraft each in Hyderabad and Delhi and 5 in Chennai.


What Next?

Going by the issues on the B737 side, induction of damp leased birds and later wet leased Airbus A319, it looks like the much maligned and troubled Q400 fleet have stabilized faster.

A replication of such a schedule with connectivity to tier 2 and tier 3 cities from Delhi, Mumbai, Bengaluru could make the difference for Spicejet. The airline will require a lot of discipline on the operations side, stability and scale to take on IndiGo and it will take a long time to reach that critical mass. The airline would be better off not competing with IndiGo on the frequency front but focus on city pairs where IndiGo is not present.

I wont be surprised if the B737 schedule is revamped either now or for the winter schedule starting October end to resemble something similar to what the Q400 schedule now looks.

However, the word of caution is that IndiGo can still bounce back like it did while launching Varanasi which led to a complete pull out by Spicejet during troubled times, only to re-launch later. With A320 NEOs at their disposal, IndiGo would not be averse to launching new stations in 2016 and expanding.

Tail Note

No matter where and how the airline wants to expand, the most critical factor will be stabilization of its schedule and improvement of OTP – which continues to be at pathetic levels currently.

During my days in B-school, I learnt Double Dip Recession in Economics. I couldn’t stop but wonder if the current scenario at Spicejet has been Double Dip. A double dip recession refers to a recession followed by a short recovery, followed by another recession. Did we see similar fate with Spicejet? From starting the recovery in early 2014 after a disastrous year, this was followed by another set of troubles in November-December of 2014, followed by the recovery which is going on now.

As they say in Economics for this, the recovery after the second dip is swift and takes economy to higher levels. I can only wish Spicejet a great outcome out of this double dip!



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