Story ID: NMspicejet06262015
India’s SpiceJet Shows Signs of Life 
By: Neelam Mathews
Caption: Return of lessor confidence could signal start of turnaround
Word Count: 393
After drastically reducing its fleet in December last year in response to a serious budget crisis, Indian low-fare airline SpiceJet is emerging from financial turbulence following a spate of restructuring strategies under a new owner. As a stop-gap measure to ensure it does not lose its airport slots, the airline has decided to add two wet-leased Airbus A319s to its complement of Boeing 737s, taking its fleet size to 20, still only about half the number of narrowbodies it operated in mid-2014. It also flies 14 Bombardier Q400s for regional routes.

“In the first phase we will consolidate our existing operations….We hope by March 2016, to add six or seven more aircraft to our fleet,” said SpiceJet controlling shareholder and founder Ajay Singh, who recently returned as the airline’s primary promoter after relinquishing control to Kalanithi Maran’s Sun Group in June 2010.

Having lost the confidence of its suppliers last year, the airline appears “on the path to recovery,” said COO Sanjiv Kapoor. “Lessors are more confident and comfortable with us [now]...The pieces of the final puzzle are coming together,” he added.

While challenges associated with cost control remain, management hopes the infusion of funds signals the start of a turnaround. “Results will tell in the next six months how well the strategy of restructuring has worked,” said Amit Mittal, an independent  aircraft leasing consultant. He added that as budget airline IndiGo emerges as the market leader with more than 100 aircraft and growing, SpiceJet would likely remain a smaller player in the years to come.

While a higher market share does not always equal high yields, “it is important for a national player or it can’t appeal to corporates,” said Kapoor. “If it is less than half of the largest player, it is hard to succeed.”

SpiceJet’s decision to lease two A319s has raised questions about its intentions for the future of its fleet. “The wet lease gives us a chance to study the aircraft,” said Kapoor.

Last year, SpiceJet ordered 42 Boeing 737 Max narrowbodies valued at $4.4 billion at list prices. Plans call for deliveries to start from 2018. “It is possible Airbus could offer to recover cancellation charges and support sale and leaseback,” said Mittal. “If it happens, it will be a coup for Airbus.”