Dusting up SpiceJet

Why would we want to either sell out or make wholesale changes when we are doing so well?" protests Partha Sarathi Basu, Chief Financial Officer (CFO), SpiceJet, when asked if the new private equity investor in the company, Dubai-government backed Istithmar is forcing a revamp. Despite Basu's protestations, his claim that SpiceJet is doing 'well' is a relative statement. Sure, the two-year-old airline declared a profit of Rs 18.5 crore for the first quarter ended June 30, but that came from a foreign exchange windfall of Rs 33.3 crore due to a stronger rupee (which made the dollar borrowings cheaper), and sale-leaseback of two aircraft. SpiceJet does make operating profits, but that's fairly small.

Still, Chairman Sidhant Sharma, who was given Executive responsibilities at the last board meeting after CEO Mark Winders quit in 2005, maintains that there is no pressure from Istithmar, which now owns 11 per cent of SpiceJet. "One change that has already happened was to give me executive responsibilities. And we are looking for a person to run our customer service operations, but not as a Chief Operations Officer (COO)", says Sharma.

Basu adds that SpiceJet has brought its costs down to global levels similar to those of Ryanair and easyJet, if fuel costs were excluded, and is now studying the model of Tony Fernandes' AirAsia, a Malaysian low-cost carrier that is setting global benchmarks in costs. "We have tried to make cost management a mantra throughout the company. Even if we save one paise per seat kilometre, that adds up to Rs 7 crore annually. If we save a rupee per boarding pass, we save Rs 60 lakh annually. In a business like ours, that is big money", Basu says.

Sometime ago, there were rumours of SpiceJet being in play. Sharma has since denied the rumours and said that the airline will focus on becoming a strong, independent player. To start with, SpiceJet will put four new 737-800s into operation in August and will start operations to Kochi. Sharma say that the airline's plans to have 35 aircraft in operation by 2011 remains intact. Suppliers like Boeing seem confident of SpiceJet's future, too. Boeing's Senior Vice President Dinesh Keskar says that his company is so confident about SpiceJet that it is facilitating loans from the us Exim Bank. "I believe SpiceJet has a great future ahead of it," says Keskar. Everyone lives in hope. If you are in the aviation business, it's more so.