Thursday, May 2, 2013

“I am not prepared to pay for market share”

Neil Mills, CEO, SpiceJet, on how route rationalisation and other decisions were key to moving the budget carrier into the black, and why he doesn’t care about market share

B&E: SpiceJet recorded a profit in Q2, 2012 (Rs.560.2 million) after five quarters. Was it an outcome of you benefitting from supply problems at Kingfisher and Air India?
Neil Mills (NM): I don’t agree. There has been a growth in the number of seats deployed as compared to the same quarter last year. The brains that have provided the seats may have changed but the total market supply has risen. So how can anyone claim that we made profits because the others failed? The logic doesn’t follow.

B&E: But numbers make the objections strong. Air India saw a 9.30% y-o-y drop in flight count in the Q2, CY2012, while Kingfisher saw a 71.80% fall. Your comment.
NM: The reality is much different. If you look at the two airlines, Air India’s issues have affected its international network. Not its domestic network. Our international deployment is only 3-4% of our total flight volume. So how can I benefit in a space where Air India didn’t have problems? As far as Kingfisher is concerned, the capacity has been replaced by everyone. I don’t see how only we benefitted from its problems.

B&E: So are you pointing towards a plan that has started paying off?
NM: Yes. It’s active management of business that is at work. Particularly, the route deployment being done on a far more commercial basis. And that actually means that we are turning around to become profitable.

B&E: Two years since you joined SpiceJet – what has been the most important change in the airline’s strategy since then?
NM: Most specifically, we have rationalised our routes. We don’t fly loss making routes any more. At the end of the day we are there to deliver returns to our shareholders.

B&E: We spoke to the IATA Chief Tony Tyler. He believes that India will remain an aviation market that will continue to have a mix of LCCs and FSCs. You think so too?
NM: If you look at major airline markets – be it Australia, US, Europe – the major chunk of volume consists of LCCs. LCCs is a value for money proposition. It suits a market like India. If you look at Network strength, On-Time Performance (OTP) and Load Factors, ours is actually better than FSCs. The FSCs have to ask, what is it that they are offering extra in terms of value for the extra price they charge?

B&E: Since January 2011, IndiGo’s market share has risen from 14.1% to 27%. Your growth has been slower – from 12.2% to 17.8%. Doesn’t market share bother you?
NM: Not at all. The airlines’s fuel bills can’t be paid with market share. My employees want to be paid with cash, not market share. I just want to be big enough to be relevant. In this industry, a bigger market share gives you no advantage, as no player, not even the largest in India possesses pricing power! I am not prepared to pay for market share. It’s a nice metric. But it is not everything.

B&E: When you were at easyJet, you changed its fleet from a Boeing one to an Airbus-Boeing mix. Is that a possibility at SpiceJet?
NM: We’re not considering any change at present.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
 
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