With $4.4-billion order placed, Boeing keeps faith in SpiceJet

NEW DELHI: With an order for 42 Boeing 737 Max worth $4.4 billion from crisis-ridden SpiceJet, the US aircraft major hopes that SpiceJet's strategy of "shrinking now and expanding later" — a reference to SpiceJet's ruthless fleet reduction — would work. Boeing commercial airplanes (VP-sales) Dinesh Keskar was in India recently and told TOI that the delivery of 737 Max to SpiceJet, Boeing's answer to Airbus' successful A320 Neo, begins from 2018 onwards and by then the low-cost carrier (LCC) "will find a way out".

SpiceJet had ordered 42 Boeing 737 Max at the Hyderabad air show this March. But today, the LCC is struggling to survive by returning planes and drastically cutting flights.

"I am not much worried. Their strategy is of shrinking now and expanding later. When you are hurting, the last thing you want to do is to expand. Anyway, SpiceJet is supposed to start getting the Max from 2018 onwards," Keskar said. SpiceJet is today flying 22 Boeing 737s — down from 35 in summer — and has cut over 50 daily flights reportedly due to a lack of funds that saw leasors taking back planes.

When asked won't the going get tougher for existing carriers, including SpiceJet, when Tata-Singapore Airlines JV airline starts flying soon and when Tata-AirAsia JV expands its wings, Keskar said: "Thanks to oil prices, operating costs of airline have fallen. With those reduced costs and current fare levels, the average gap in break-even price per ticket is $10 (Rs 600-700). Indian carriers will be in profit during this peak holiday season." He added that SpiceJet will be able to deploy its smaller fleet more gainfully.

While aircraft manufacturers keep their fingers crossed for airlines (remember the hit Airbus took when its customers Air Deccan and Kingfisher folded up with the latter having placed orders for five A-380s that were written off only recently), SpiceJet is fighting for survival. The directorate general of civil aviation (DGCA) has asked the LCC to give weekly status reports on its payables to various agencies.

Top DGCA officials said the airline has informed them that 116 pilots have resigned and are serving notice period till mid-2015.

On its part, SpiceJet says it is cutting Boeing fleet to get out of unfavourable leasing contracts and unwanted aircraft.