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| Edited By: KV Ramana |Source: DNA |Updated: Mar 18, 2018, 02:26 AM IST
SpiceJet, the discount airline that saw its net profit drop 14% in the December quarter, is working on a two-pronged strategy of increasing the airfares and focusing on operational efficiencies to contain costs.
The company, controlled by media baron Kalanithi Maran, on Friday announced a plan start flying turboprop planes in July to the country’s smaller cities and towns.
The carrier’s purchase of the 15 Bombardier Inc Q400 planes will be funded by a loan from state-run Export Development Canada.
The airline also plans to make Hyderabad its hub for regional operations in the south and central India.
On pressure on margins, Neil Raymond Mills, SpiceJet’s CEO, said, “Unfortunately, the trend of having to pay taxes is something that occurs when you make profits. And the high fuel price at $120 a barrel is going to impact our profits.”
The company attributed the fall in profit in the December quarter, despite sales climbing 26%, to tax outflow of about Rs23.5 crore and a 48% year-on-year rise in fuel costs to Rs310 crore.
On the airline’s plan to insulate profits from further impact, he said, “We may have to look at fares. We will have a look at other areas of our businesses too, to see how we can be even more efficient than we are today in keeping costs down so that we don’t have to pass on the full burden to the passenger.”
Mills said the timing and quantity of fresh round of fare hikes will be announced shortly.
He said the company had absorbed a significant portion of the hike in fuel charges during the fourth quarter.
SpiceJet Ltd has set an ambitious target of hiring 150 pilots over the next one year to support its fleet expansion plans.
The carrier also plans to increase its fleet to 70 aircraft by the end of 2013 from 28 now, Mills said. “It is a challenging task. We are looking at experienced people. Besides that we are also having excellent training capabilities.”
Though SpiceJet is yet to decide on the specifics of improving operational efficiencies, he said, “We are re-evaluating major cost areas across the business. Nothing is left untouched. We have huge initiatives across the business. These include how we do maintenance (of aircraft), how we buy aircraft, how we do ground handling.”
SpiceJet also sees a game-changer in the induction of 15 78-seat Bombardier Q400 turboprop aircraft, which are being acquired for $450 million. The funds for the expansion would be raised as export credit from Canada for 15 aircraft and SpiceJet will initiate negotiations on raising funds for the next 15 planes it has option to buy from Bombardier.
SpiceJet would serve Tier II and Tier III destinations such as Aurangabad, Bhubaneswar, Goa, Indore, Madurai, Mangalore, Nagpur, Nasik, Raipur, Rajahmundry, Tirupati and Vijayawada.
