SpiceJet is losing a lot of money. Who is benefiting from it?

When India went into lockdown, SpiceJet was ranked second in domestic market share. In August, the airline had a market share of just 2.3%, having carried just 301,000 domestic passengers. The market continues to grow, with both IndiGo and Air India holding record orders, with deliveries scheduled until 2036. From January to August, domestic air passenger traffic in India reached 105.4 million, a record high for the period, up 4.8% from 2023, making it the best year for domestic aviation in India to date.

The airline’s market share fell from 5.6% in January to 2.3% in August. The 3.3% loss was almost equally shared between Air India Group and IndiGo. Both airlines have seen an increase in market share since January, with Air India (including Air India Express) rising from 12.2% to 14.7% and IndiGo from 60.2% to 62.4%. IndiGo’s market share increased despite AOG (aircraft on ground) issues in January due to the grounding of several Pratt & Whitney-powered aircraft.

The gradual decline in passenger numbers means the shift is gradual and slow, affecting fewer passengers, unlike the collapse of Go FIRST, which had a market share of 6.4% and carried 830,000 passengers in the month before the collapse. While the overall shifts appear to be different for both airline groups, the dynamics at the route level vary widely.

Cancelled routes

Data provided exclusively for this article by aviation analytics firm Cirium shows that SpiceJet has significantly reduced the number of flights on many routes since the beginning of the year. By the company’s own admission, it has grounded 36 aircraft.

SpiceJet cut back on routes between Mumbai to Goa, Chennai and Kolkata to Port Blair and Delhi and Bengaluru, and southern routes between Chennai, Hyderabad, Bengaluru and Kolkata. This led to the airline’s near exit from its one-time hub Chennai, where Maran had a majority stake.

Interestingly, on certain routes like Bengaluru-Kolkata, the total number of flights increased after SpiceJet’s exit, with Vistara adding maximum capacity. Similarly, Delhi-Bengaluru-Delhi also saw an increase in capacity, with Air India and IndiGo adding flights. Similarly, the cancellation of its flights from Mumbai to Srinagar was not affected due to the entry of Akasa Air and Air India Express.

Few routes are seasonal, so comparing January with September is not exactly the same. Routes like Delhi-Kandla or Bengaluru-Darbhanga lost connectivity due to RCS-UDAN routes, while routes like Guwahati-Jaipur were operated by Air India Express. On the other hand, Pondicherry Airport was downgraded to a non-operational airport.

Will the rights and time slots be retained for a long time?

SpiceJet started the quarter with 1,657 domestic flights per week. So far, the airline has never operated anywhere near that number. In July, the airline operated an average of 704 flights per week, which is just 42.4% of its approved flights. Over the past few flight scheduling seasons, the airline has been getting fewer and fewer slots approved. Long unused slots mean fewer flights being operated, which affects airport revenues and passengers as it can lead to higher fares due to lack of demand.

Similarly, SpiceJet also mentioned that it has rights to lucrative international destinations such as London Heathrow and Sharjah, where bilateral rights are hard to come by and other airlines can benefit from. The airline also has rights to Hong Kong, Afghanistan and Russia, but these rights are not in great demand.

The government has adopted different rules at different times based on specific circumstances, so there is no uniform rule to deal with such cases. Normally, the government will give leniency and let airlines keep flight slots because it helps valuation. However, this is a trend, not the norm, and the government can make different decisions based on market demand.

SpiceJet’s current traffic in the domestic market is around 10,000 passengers per day. This includes some unique routes, which has helped the airline to maintain high fares and exceed the industry average. However, recently, its famous peak load factor statistics have taken a hit, indicating that people have become more aware of the ongoing crisis and may seek alternatives where possible.

When an airline goes to the market for funds, it will be in “holding mode,” a term Vijay Mallya famously coined when he tried to save Kingfisher Airlines. Even for the government, the stakes are high because two major airlines and a handful of regional carriers have collapsed since 2014. Mallya couldn’t do it, but can Ajay Singh?