Spicejet Airlines - Industry Overview

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  • Topic: Supply and demand, Airline, Low-cost carrier
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SPICE JET AIRWAYS

ECONOMICS PROJECT
ON

SPICE JET

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SPICE JET AIRWAYS

SPICEJET AIRLINES
INDUSTRY OVERVIEW
At a time when most developed economies shrunk, a 4.7% growth during the first quarter of 2009-10, puts India among the top-most growing nations. In spite of the global recessionary trends, India managed 6.7% economic growth in the fiscal 2009. The growth in the aviation sector is linked with the growth of GDP, which according to latest figures released in Dec 2009 has rebounded to pre-slowdown phase of nearly 8%.In recent years, with the entry of several new airlines; the aviation sector in India has undergone a major transformation. The arrival of the low-cost airlines like Air Deccan (merged with Kingfisher now), Go Air, and SpiceJet revolutionized the sector to meet the growing demand of economical and faster inter- city travel options within India. Air travel is no longer the luxury of business executives and the economically well-off. As more airlines are entering India’s domestic aviation market, it is leading to increased competition, resulting in drastic fare cuts.

ABOUT THE COMPANY
SpiceJet is a low-cost airline headquartered in Chennai, India. It began service in May 2005 and by 2008, it was India's second-largest low-cost airline in terms of market share. The origins of SpiceJet track back to February 1993 when ModiLuft, one of India's first post-deregulation airlines that was launched by the Indian industrialist S K Modi, in technical partnership with the German flag carrier Lufthansa. The airline project was started in February, 1993 by S K Modi, Ashutosh Dayal Sharma and Kanwar K S Jamwal and on 5 May 1993 took the first flight from New Delhi to Mumbai. The airline actually started operations within three months of its conception – a record of kinds in itself. It maintained very high standards in flight safety, ground maintenance and on-time performance, owing to a strong support from Lufthansa AG. ModiLuft was the only airline in India to fly a three class configuration compared to others Airlines, It had a First, Business and an Economy Class and an incident free track record of flying. It used Boeing 737-200 Aircraft leased from Lufthansa. ModiLuft did not last very long specially because the business parity of the German and Indian partners was not the same and problems arose. Then the cooperation was broken off and ModiLuft acquired Boeing 737-400 aircraft to replace the 737-200s from Air U K, but the future of ModiLuft was already sealed and the airline ceased operations in 1996. However, the air-operating certificate (AOC) of ModiLuft did not lapse and the airline due to lack of funds changed hands and renamed Royal Airways. In 2004, management of the airline was taken over by Ajay Singh, who renamed the company, raised funds and re-started operations. Thus, was born SpiceJet, following the low cost model. Indian media baron Kalanidhi Maran acquired 37.7% in the business in June 2010. After completing 5 years of flying, SpiceJet was allowed to commence international flights by

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SPICE JET AIRWAYS
the Airports Authority of India on 7 September 2010. SpiceJet launched flights from Delhi to Kathmandu and Chennai to Colombo. The first international flight took off on 7 October 2010 from the Delhi airport. Its market capitalization is around 1,615.31Cr. Currently there are eight scheduled airlines in the domestic market in India, four of which are Low cost carriers (LCCs) - the full service carriers are also competing on low fares with the LCCs. There has been consolidation in the industry by way of merger of two private full service carriers and also two state owned full service carriers.

Market Share-2007
Air deccan Indian Airlines 0.8% 30.4% 19.3% 21.6% 0.9% 2.5% 6.9% 8.8% 8.8%

Market Share 2008
Air India 1% 12% 4% 11% 14% 14% 15% Jet group Kingfisher Spice Jet

Kingfisher
Air sahara Spice jet Go air Indigo Paramount Jet airways

29%

Go air Indigo...
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