Out Of India - SpiceJet Goes International

Having commenced domestic operations in May 2005,Spicejet will take its first steps into the international market from October 7^th with a six-weekly, Delhi-Kathmandu service, the capital of Nepal, and from October 9th, a daily service from Chennai to the Sri Lankan capital of Colombo. The routes will be operated with single-aisle B737-800 equipment.

Spicejet is currently the sixth largest carrier in India in terms of weekly flights operated, according to September Flightbase data, as the table below demonstrates.

Source Flightbase 14-20 September 2010

It should be noted that the Air India network includes flights that are still operated under the Indian Airlines flightcode given that the Indian Airlines brand no longer exists.

SpiceJet has firmly established itself as an important player in the Indian market. Chennai is currently its fifth largest operating base behind Delhi which accounts for 21% of all scheduled seat capacity, Mumbai (16%), with Calcutta and Hyderabad accounting for 9%. Chennai currently accounts for 7% of all scheduled weekly seats in the Spicejet network.

WHY COLOMBO AND KATHMANDU FOR SPICEJET

Whilst not being its major base, Chennai will be natural source market for the Sri Lankan market given the links between the two regions and the short sector length, compared with markets such as Delhi and Mumbai. Between June 2009 and 2010, IATA BSP data (Airport IS) shows that over 860,000 O+D passengers flew between India and Sri Lanka with SriLankan Airlines having a 46% share of this market, with Jet Airways low-cost subsidiary JetLite having a 12% share.

Flightbase data for September shows that seven carriers operate between India and Sri Lanka; SriLankan Airlines, Mihin Lanka, JetLite, Air India Express, Kingfisher, Air India and Jet Airways.

Not surprisingly, Chennai is a strong market for Sri Lanka, with 49 weekly frequencies to Colombo, operated by SriLankan Airlines, 14 times weekly, JetLite seven times weekly, Air India Express seven times weekly, with Kingfisher, Air India and Jet Airways all serving the route also on a daily basis.

IATA BSP data shows that over 530,000 passengers flew between Chennai and Colombo between June 2009 and June 2010 which is over 60% of the total India-Sri Lanka market.

Spicejet will be keen to tread carefully in its first steps into the international market, and rather than opening an unserved route or a thinner route, it has decided to add capacity into what is a trunk route and fight for existing capacity whilst also hoping to stimulate new passengers with low cost fares.

Kathmandu will be a good opportunity from Delhi, with an existing O+D market of over 455,000 passengers and currently served by five airlines, Jet Airways, Air India, Kingfisher, Royal Nepal Airlines and Jetlite.

WHERE NEXT FOR SPICEJET

Spicejet has also publically stated that it plans to add service to the Bangladeshi capital of Dhaka, this would seem a natural addition to its fledgling international network.

Dhaka has seen over 530,000 O+D passengers travel from India between June 2009 and 2010, given its geographic location it may well be better served from Kolkata which is currently served by Jet Airways, Biman Bangladesh and GMG Airlines, Kingfisher and Air India Express, which again will provide an existing market and a short sector length.

The O+D market from Kolkata to Dhaka is large with over 373,000 passengers travelling between June 2009 and 2010 with Jet Airways having a 54% share of this market.

Spicejet will be keen to continue growing its international network, which will remove its dependence on a domestic network and domestic economy that has seen Indian carrier suffer after a boom in domestic airline travel. It will continue to employ a strategy of serving markets that are already created and may well look to the markets of the Middle East.

There is significant demand for VFR and leisure travel to the Middle East, with over 13.5 million O+D passengers having travelled between June 2009 and 2010. Entering already established markets on low frequency will be seen as a low risk strategy for Spicejet as it begins to shape its international network.