The History Behind Indian Low-Cost Carrier SpiceJet

SpiceJet is India’s second-largest low-cost carrier and domestic operator. With a fleet of Boeing 737s and DHC Q400s, the carrier is similar to many budget airlines globally. But did you know the history of the airline, including its origins as a Lufthansa-owned carrier? Let’s find out more.

Spicejet
SpiceJet is one of the biggest 737 MAX customers globally. Photo: Getty Images

Beginning

When looking up SpiceJet’s founding year, many might point to 2004, the year Ajay Singh began flying the low-cost carrier. However, in reality, SpiceJet can trace its origin and Air Operators Certificate (AOC) to an airline known as ModiLuft.

ModiLuft was founded by Indian businessman SK Modi and Lufthansa in 1993, which was eying a stake in the recently liberalized aviation industry. The carrier began flying that May with a Lufthansa 737-200 and crew training from the German flag carrier. As India’s first major joint-venture, expectations were high.

ModiLuft 737-200
ModiLuft made a strong start with seven domestic destinations and a fleet of seven aircraft in under three years. Photo: Aero Icarus via Flikcr

Despite some impressive records, ModiLuft began to fall apart in 1996 due to rifts between the two owners. While Modi accused Lufthansa of not funding the airline, the latter accused Modi of failing to pay lease dues. At the end of 1996, the airline officially shut down after Lufthansa pulled out. Notably, ModiLuft’s AOC lapsed but remained dormant, an important point for the future.

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Takeover

In 2004, a young entrepreneur named Ajay Singh drew up plans to create SpiceJet, one of India’s first low-cost carriers. However, while the usual process would be owners chasing the all-important AOC, Singh found a simpler way. He opted to purchase ModiLuft’s AOC and rename it SpiceJet, helping save time in starting operations.

SpiceJet began operations in 2005 using a leased Boeing 737-800, setting it apart from competitors IndiGo and GoAir, who opted for the A320 family. The first flight departed from New Delhi to Mumbai on 24th May, officially kicking off the airline.

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SpiceJet opted for the trusted and popular 737 family in 2005. Photo: Getty Images

As with many budget airlines, SpiceJet operated 737-800s loaded with a maximum 189 seats in a 3-3 layout. While this cut down on comfort compared to Air India and Jet Airways, it gave the carrier a huge cost advantage. By 2008, SpiceJet was the third-largest budget airline and quickly reaching the top five in India.

Troubles

By the time the 2010s rolled around, budget airlines were quickly becoming the future of Indian aviation. In 2010, SpiceJet ordered another 30 737-800s to boost its future expansion beyond the original 20. This was a bonus for Boeing too, which was nervous about Airbus’ growing order book in the country. Founded Ajay Singh left the airline in 2010, with other founders taking over control.

However, not everything was smooth in the hyper-competitive market. SpiceJet quickly racked up losses in 2012 due to the rise in oil prices and faced scrutiny from regulators over safety concerns. While an influx of cash helped it survive that year, the carrier’s underlying debt put it at high risk of failure.

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SpiceJet’s losses pushed it within days of bankruptcy as it began canceling flights. Photo: Getty Images

By the end of 2014, SpiceJet was days away from bankruptcy. The airline was losing planes and loans were getting harder to secure. However, the carrier made a series of changes in 2015 to remain afloat and once again gain a major presence in the market. This change was helmed by the savvy and politically connected Ajay Singh, who took over a major share of SpiceJet again and became MD.

Back in it

After a few years of recovery, SpiceJet was flourishing again. In 2017, SpiceJet doubled down on the 737 MAX and purchased a huge 100 more aircraft. In total, the airline now holds 206 orders for the MAX, of which only 13 were delivered before its grounding in 2019. While the grounding hurt the budget airline’s major expansion plans, there was another surprise coming.

The collapse of Jet Airways in April 2019 gave SpiceJet the chance to grow its fleet without a wait or the ungrounding of the 737 MAX. Moreover, government rule changes meant it could get allocations at Jet’s major Mumbai and Delhi hubs if it took on new aircraft. SpiceJet added 42 new planes from March 2019 to March 2020, most of which were ex-Jet 737s.

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SpiceJet aggressively added new 737s as it sought a major expansion in market share. Photo: Getty Images

In the short term, this paid off handsomely. SpiceJet managed to capture ex-Jet capacity and even reported a record profit in the same quarter. However, this bump didn’t last too long, and losses began to creep back by the end of 2019, hurting the debt-saddled airline. However, these troubles withered away in comparison to COVID-19.

Big trouble

In February 2020, SpiceJet was riding high, operating its largest fleet in history and making big plans, including a new foreign base. However, just a month later, COVID-19 came and decimated business. SpiceJet was particularly exposed and only survived thanks to one thing: cargo.

SpiceJet’s freight arm, SpiceXpress, became the center of the airline’s operations during a brutal two-month lockdown in early 2020. This helped bring in desperately needed revenue and stave off possible bankruptcy. SpiceJet also began selling COVID tests and other medical equipment to the government to diversify away from the airline during the pandemic.

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SpiceXpress revenues were up over 700% in 2020, thanks to strong foreign cargo demand and low capacity. Photo: Getty Images

However, cargo could not prevent the airline from making huge losses and continuing to struggling in 2020. SpiceJet began seeing a series of lawsuits and aircraft repossessions during the pandemic, as it failed to pay lease rentals. This meant the fleet size dropped to below 100 again and reduced capacity. However, the lack of international flights means this will only have a small impact in the short term.

Keep going

After a disastrous spring, SpiceJet is once again rebuilding brick by brick as it did in 2015 after its crisis. While its market share has fallen in the last quarter, this can be reversed in the coming months. However, for now, SpiceJet’s history continues on and hopes to be less bumpy in the coming years.

What do you think about SpiceJet’s history? Have you flown with them? Let us know in the comments!

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