SpiceJet: This is how Ajay Singh plans to reduce costs, improve margins

SpiceJet expects reduction in overall operational costs and improved margins once the fuel-efficient CFM engine-powered Boeing planes are pressed into service, according to the airline's chief Ajay Singh. The low-cost carrier, which has remained profitable for 12 straight quarters after being on the brink in late 2014, is charting out ambitious expansion plans, including the possibility of long haul low-cost overseas flights. In one of the biggest transactions in domestic aviation space, SpiceJet has inked a USD 12.5 billion deal with French major Safran Group for CFM aircraft engines.

The deal is for LEAP-1B engines to power a total of 155 Boeing 737 MAX planes, along with spare engines to support the fleet. Describing it as a "landmark deal" for the airline in terms of purchase of engines and the ten-year maintenance contract, Singh said the engine's fuel burn is around 15 per cent lower, while the contract ensures that there is a one-stop solution. SpiceJet will pay a flat fee and Safran will look after all the maintenance of engines for the next ten years, he said, adding that there is a great deal of stability in this programme. "It will help us reduce our overall cost of operations and therefore it will increase margins for SpiceJet. It will help us be more competitive in the market place," Singh, who is the Chairman and Managing Director, told PTI in an interview.

Under the deal, the no-frills carrier will be getting around 350 engines, including spare ones. It would start getting the engines from August onwards. Reduced fuel burn and operational costs aside, the engines will also help the airline fly the aircraft for extra hours. "This engine will enable us to fly one hour extra... Right now, we can do a maximum of four-and-a-half hours. This will add at least one hour and this will mean that several cities that were not within our reach can be within the reach," Singh said. CFM engines are manufactured by CFM International, a joint venture between Safran and General Electric.

SpiceJet's fleet has more than 38 CFM 56-7B-powered Boeing 737 NG family aircraft. The budget carrier operates 408 average daily flights to 52 destinations, including 45 domestic and 7 international ones. Earlier this month, Safran CEO Philippe Petitcolin had said it expects more big deals like that with SpiceJet and higher share in the Indian commercial aerospace market.