Our international business is 7 per cent of our total business in the current quarter and we expect to take it to 20 per cent over the next 18 months. Neil Mills, CEO, SpiceJet

The low-cost airline SpiceJet has reported a profit after tax of Rs 102 crore for the quarter ended December 31. In an interview to Business Line, its Chief Executive Officer Neil Mills explains the reasons behind the change in fortunes of the carrier. Excerpts:

One of the reasons for the company returning to profit is better fleet optimisation. What exactly does that mean?

It shows that we are focusing our growth on international and regional services, particularly metro services to tier-II and -III cities. That is really where the strategic shifts have been and it is starting to show rewards.

Could you give an example?

Our regional growth is coming from routes like Indore, Jabalpur and Bhopal where there was not much connectivity before. This shows that the growth of the business is going to those areas.

Growth internationally?

Not particularly, because airports in tier-II and tier -III cities do not have particularly long runways so obviously that connectivity will happen through the metros. Our connectivity from tier-II and -III to international destinations is obviously growing and it will continue to grow.

What is it currently and by how much would it grow?

We have grown in terms of international passengers by 80 per cent and regional passengers by 82 per cent in the last 12 months. Our international business is 7 per cent of our total business in the current quarter and we expect to take it to 20 per cent over the next 18 months.

Is the 7 per cent growth in international business because you have added more flights? And is the 80 per cent growth in the number of international passengers because of the low base?

Yes, obviously because we have added more flights. There is a 25 per cent growth in the number of departures and a lot of those are smaller aircraft, the Q-400. Of course, it is because of the low base. Year-on-year we have grown significantly in international operations.

Is the focus shifting to international routes?

It is not that the focus is shifting to international routes. What we are doing is that the focus of the growth is shifting to international and regional markets. But the main market that we are catering to in India is pretty stable.

Fuel costs are falling in this quarter compared with the previous quarter. What do you attribute this to? Have you started importing fuel?

This is partially because of more international flights and partly because of an increase in average revenues.

Is it a cause for worry that Air India is ahead of you in terms of market share?

No. Whether I am at 19 per cent or 20 per cent or whatever, I still have not worked out a way to use the market share to pay the bills. As long as we are large enough to be significant, 1 per cent or 2 per cent one way or the other does not make a difference.

Where has the profit of Rs 102 crore come from? Is it from revenues generated from operational activities or non-operational activities?

It has almost all come from operational activities.

There is a mention that no provision has been made for interest of Rs 747.1 lakh up to December 31, 2012 relating to earlier years on the outstanding inter-corporate deposits taken by the company. Had this been accounted for, the net loss for the quarter ended December 31, 2012 would have been higher by Rs 747.1 lakh. Can you explain this?

There is an issue relating to the courts which has been outstanding for years. It has been in our accounts for years as well. We do not agree with it. We do not believe that we have to pay it. If it has been provided for, it would be different. We do not agree with it, we do not think we have any legal requirements.

This quarter you had the sale of 10 lakh tickets at discounted prices. Will this boost revenue in the next quarter?

We were targeting the seats that would not have been filled at all. It will help improve our load factors and not necessarily improve our yields. Because we are targeting filling the unsold seats it will certainly help improve the quarter results.

What is the status on tying up with a foreign airline?

We have always said that it is not necessary for us to go in for a foreign tie-up or with a source, be it a fund or a foreign airline. We will do the deal only if it makes sense. If the right deal comes along we will try and do it.

How do you describe a right deal?

It should make economic sense for the company and shareholders.


(This article was published on January 21, 2013)
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