SpiceJet Lobbies for International Route Subsidies

by Neelam Mathews

 - March 29, 2018, 9:08 AM

Budget airline SpiceJet wants India to extend its Regional Connectivity Scheme (RCS) to international destinations, the airline’s managing director, Ajay Singh, told AIN during the Wings airshow held in Hyderabad recently.

In an effort to lower the cost of air travel, Indian authorities action and award routes identified under the RCS to airlines asking for the least amount of subsidy and willing to submit to ticket price ceilings. Also called "Udan," the RCS—introduced last year—aims to develop remote regional airports.

“We are looking at a version of Udan,” said Singh, referring in particular to the untapped potential of eight hilly states of the Northeast Region (NER), many sharing a common border with China and Southeast Asia. A purchase agreement signed last year for 25 specially configured Bombardier Q400s will make SpiceJet the first airline in the world to operate a 90-seat turboprop.

While SpiceJet does not take subsidies for the domestic RCS, a subsidy for international flights from NER for two years will enable carriers to stimulate demand through low fares in the latent market. SpiceJet has already connected 10 tier-two cities with 70 flights a week to the popular destination Dubai. Singh said cities such as Guwahati in the state of Assam could serve as a regional hub from India to neighboring countries. Major airports in Bangladesh, Cambodia, Laos, Myanmar, and Vietnam all lie within a short flying distance of around 45 minutes to an hour from Guwahati. Already Guwahati ranks as India’s eighth busiest airport, thanks to traffic from the NER. It handles 800 flights a week, compared with just three a week three decades ago.

Indian officials believe Bangkok, Singapore, and Kuala Lumpur could all become popular destinations to and from the NER. “Southeast Asia is a dynamic region with close ethnic and cultural ties with India and there is high traffic potential from NER,” said Shefali Juneja, the director of India’s Ministry of Civil Aviation, Shefali Juneja

SpiceJet plans to double its fleet of 66 Boeing 737s and Q400s by end 2019, about the time it expects demand will surge for international Udan flights. It expects delivery of its first Boeing 737 Max in August, Singh said.

SpiceJet recently signed a $12.5 billion deal with CFM International for engines and a 10-year services contract for a fleet of more than 150 Boeings. “The growth of the domestic Indian [aviation] market is the highest in the world,” said Boeing senior vice president for Asia Pacific and India sales Dinesh Keskar. “Every segment of traffic in and out of India is going to grow for the next 20 years.”