At a time when most carriers are making huge losses, a very tight control on costs has helped low-cost airline SpiceJet to book profits, said its top official at the 25th annual convention of the Indian Association of Tour Operators (IATO) in Bangalore.
Speaking on ‘Tourism - Managing the downturn’, Mr Kamal Hingorani , Vice-President – Sales, SpiceJet, said, “The difference between us and other carriers is the very tight control we have on costs.”
Low-cost model
The airline’s simple, low-cost model ensured that its unit cost for an available seat kilometre (ASKM) was about Rs 2.36/ASKM, he said.
SpiceJet’s cost/ASKM is still half of what the largest private legacy carrier incurs at Rs 4.80/ASKM.
In the first quarter of this fiscal, the airline had reported a 24 per cent reduction in cost/ ASKM and 12 per cent growth in ASKM.
With demand for low-fare carriers increasing, full-service carriers are now going the low-fare route and have deployed considerable capacity to this ‘all-economy, no frills’ model.
As Mr Hingorani pointed out, there were three low-cost carriers till three months ago, while there are eight now.
Currently, there is a 20 per cent imbalance in the demand-supply scenario, and more full-service carriers opting for a low-fare model would only impact the yields, he said.
Demand, supply
Though the supply of economy seats has now increased, it would not affect SpiceJet’s business much, since “essentially our costs are low,” he added.
“We will still be profitable even at reasonably low fares, which full-service carriers cannot,” said Mr Hingorani.
According to him, SpiceJet had the lowest aircraft to employee ratio among all the domestic airlines at 1:125.
To sustain the competition, the airline has to “constantly innovate, use more technology and be smarter,” said Mr Hingorani.
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