SpiceJet

A Spicy Affair: The Story of SpiceJet

Introduction:

"The basic problem was of trust. Customers were not booking tickets with us, lessors were taking back

planes, vendors had stopped services, and the government was after the airline for clearance of tax dues.

Passengers were inconvenienced and employees thought they had no future. Everything that could go

wrong had gone wrong,"

- Ajay Singh, CEO of SpiceJet

SpiceJet Limited was set up in 1994 as "airtaxi" and later gained by Ajay Singh and renamed as SpiceJet

in 2004. Imperial Airways– advanced SpiceJet is a carrier organization, which was prior known as

Modiluft. It was among the principal privately owned businesses that ventured into the Indian flight part.

Further, in May 2004 Royal Airways changed its name to SpiceJet. The carrier was propelled with a goal

to convey the most reduced air passages with the most astounding purchaser esteem, to value delicate

shoppers. Kalanithi Maran had obtained controlling stake from Ajay Singh in 2005.

As of now, the organization appreciates a piece of the pie of more than 8%. With 125 flights to 19 goals

day by day and more than 50,000 individuals flying in a month, SpiceJet takes after the Low-Cost Carrier

(LCC) plan of action on the lines of the best LCCs all around and gives the most minimal cost per unit

among Indian LCCs. SpiceJet's new age armada of 15 Boeing 737– 800/737– 900ER airship is supported

by cutting-edge innovation and foundation to guarantee the most noteworthy measures in security and

working effectiveness.

The organization has brought about lost approx. 103 million dollars for the year finished March 31, 2015,

and has gathered misfortunes approx. 500 million dollars against investors' assets of approx. 300 million

dollars. As of this date, the organization's aggregate liabilities surpass its aggregate resources by 190

million dollars. Verifiably the organization's working outcomes have been really influenced by different

components, including high avionics turbine fuel costs, noteworthy devaluation in the estimation of the

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money, and evaluating weights. Because of its operational and budgetary position, the organization had

additionally deferred installments to different gatherings, including merchants and its contribution to

statutory experts in the course of the last 12-year and a half. These components have brought about a

material vulnerability that may make noteworthy uncertainty about the organization's capacity proceed as

a going concern.

A Glimpse of Indian Aviation Industry:

The civil aviation industry in India has emerged as one of the fastest growing industries in the last three

years. India is currently considered the third largest domestic civil aviation market in the world. India is

expected to become the world’s largest domestic civil aviation market in the next 10 to 15 years as per the

Union Minister of State for Civil Aviation, Government of India. According to International Air

Transport Association IATA, India will displace the UK for the third place in 2025. The Civil Aviation

industry has ushered in a new era of expansion, driven by factors such as low-cost carriers (LCCs),

modern airports, Foreign Direct Investment (FDI) in domestic airlines, advanced information technology

(IT) interventions and growing emphasis on regional connectivity.

Market Size:

Domestic air traffic rose 17.69% year-on-year in December 2017, continuing its double digit growth,

according to the civil aviation regulator Directorate General of Civil Aviation (DGCA). About 11.24

million passengers flew in December 2017, up from 9.55 million a year earlier. Passengers carried by

domestic airlines during 2017 were 117.1 million as against 99.89 million during the corresponding

period of previous year, thereby registering a growth of 17.31 per cent, as per the DGCA.

As of December 2017, the existing fleet of aircraft stands at 548 aircraft in India, and another 920 aircrafts

are expected to be inducted into the fleet by 2025.

Investment:

According to data released by the Department of Industrial Policy and Promotion (DIPP), FDI inflows in

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air transport (including air freight) between April 2000 and September 2017 stood at US$ 1.59 billion.

India is estimated to see an investment of US $25 billion in the next decade in the airports sector, and

traffic growth of 13 per cent, according to Morgan Stanley. According to them, the share of air travel in

air and rail travel combined in India will grow to 15.2 per cent by 2027 from 7.9 per cent now. Capex

plans to the tune of Rs 65,000 crore (US$ 10.08 billion) have been finalized by the Airports Authority of

India with Rs 17,500 crore (US$ 27.13 billion) for the next five years and around Rs 22,000 crore (US$

3.41 billion) for brownfield expansion in Delhi, Mumbai, Hyderabad and Bengaluru by private operators

and around Rs 21,000 crore (US$ 32.55 billion) for greenfield airports.

Key investments and developments in India’s aviation industry include:

The Airports Authority of India (AAI) will undertake new development works at Lucknow, Deoghar,

Rajkot and Allahabad airports. The objective is to improve and develop airport infrastructure to meet

growing traffic demands. AAI plans to construct new integrated passenger terminal building at Chaudhary

Charan Singh International Airport, Lucknow at an estimated cost of Rs. 1,230 crore (US$ 190.65

million). The new terminal will be able to handle 4000 passengers during peak hour and 6.35 million

passengers per annum.

Indian aviation has been on a roll for some time now, but all that may change now, given rising jet fuel

prices which may in turn increase air fares. India’s domestic traffic soared 21.8%, marking the 20th

month of double-digit traffic growth and the 13th consecutive month in which it has led domestic markets

in the world. According to International Air Transport Association, or IATA, that represents some 260

airlines comprising 83% of global air traffic, Indian growth is being propelled by the comparatively strong

economic backdrop as well as by substantial increases in service frequencies.

Fuel Prices:

For India, lower jet fuel price was the game changer. In India, fuel costs account for about 45-55% of the

revenue of domestic airlines and a 4% drop adds around two percentage points to the operating margin of

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airlines. And, in financial year 2015-16, Brent crude fell by 28.14%. Not to forget, cheap air fares has also

helped make India the fastest growing aviation market.

“Passenger growth in India was partly propelled by falling oil prices and demand stimulation measures by

domestic airlines as they had a lot of empty seats and they discovered that selling them at a discount was

better than flying empty,” said Sanjiv Kapoor, chief strategy and commercial officer, at Vistara, promoted

by TATA SIA Airlines Ltd. But that is no more the case.

On 1 June, oil marketing companies hiked jet fuel prices by a steep 9.2%. In the fourth straight monthly

increase in rates, jet fuel prices at Delhi airport were increased by Rs.3, 945.47 per kiloliter, or 9.2%, to

Rs.46, 729.48 per kiloliter. “The scene is no more the same. Airline load factors especially in economy

class are high (so less seats are left to fill) and oil prices have started moving up as well. Airport capacity

and slots at some major airports are also not available for additional growth,” Kapoor said.

Therefore, if oil prices continue to rise, it could dent the robust passenger demand that is growing in

double digits for the last two years, Kapoor said. From hovering at $30.84 a barrel on 20 January 2016, it

rose to $49.69 on Wednesday, registering a 61.12% increase. “However, higher oil prices may or may not

translate into higher air fares as jet fuel cost is just one input costs among other decisive factors such as

capacity available and competition dynamics in the market,” Kapoor added.

Sharat Dhall, president, online travel agency firm Yatra.com, said lower jet fuel prices have acted as a

stimulus for air traffic growth over the past few months, encouraging people to take flights for their

summer holiday travel. “With the price of Aviation Turbine Fuel (ATF) increasing by a steep 9.2% (for

next 15 days announced by oil marketing companies), this could result in an increase in airfares as fuel

constitutes approximately 40% of an airline’s operating costs. Any increase in airfares will act as a

dampener for travelers planning trips going forward,” Dhall said. Experts tracking the aviation sector also

endorse that Indian civil aviation has not seen a decent upwards fare revision and the current spike in ATF

prices may warrant an increase in the base prices of Indian airlines.

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Rating agency firm ICRA Ltd on Wednesday said that with new airlines expected to enter the runway, the

competitive intensity in the domestic aviation industry is expected to increase going forward, with

potentially significant over-capacity in the next 12-24 months if the demand growth is not sustained in the

event of fare hikes due to an increase in fuel prices. The domestic airlines are likely to add 55 new aircraft

in this period as against 33 during 2015-16, ICRA said. The addition of aircraft in the fleet, coupled with

improved network planning and operational efficiencies, are likely to boost overall industry capacity, with

the industry ASKMs (available seat kilometers) expected to report strong double-digit growth in 2016-17.

High-skilled Labor:

The National Aviators Guild, a labor union representing more than 1,000 Indian pilots at Jet Airways,

says it is taking a stand against discrimination. It says Indian pilots have to work longer hours for lower

wages than pilots hired by the airline from overseas.

"[Expat pilots] work for eight weeks and get two weeks off," NAG President D. Balaraman told

CNNMoney. "They're trying to make us work for 11 weeks to get the two weeks off, which we feel is

unfair." The union had directed its members to stop sharing a cockpit with the airline's expat pilots from

Monday. It called off that strike over the weekend after being promised talks this week with airline

management. The threat of a strike hasn't gone away entirely and will depend on the outcome of those

negotiations. According to the airline, only about 8% of its 2,000 pilots are expats. The spokesperson

added that Jet Airways had hired more than 400 Indian pilots in the past 16 months. Expat pilots are

employed by several airlines in India, where the aviation industry is growing at almost 20% per year and

could become the world's third-largest by 2020.

According to government figures cited by local media, around 400 of India's 6,300 pilots come from

overseas. Expat pilots are also in demand elsewhere in Asia: China has been offering staggering six-figure

salaries for foreign pilots willing to come fly in the country.

History of Spice Jet:

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Spice Jet has its origin in Modiluft which was established by Indian industrialist Satish Kumar Modi in

partnership with Lufthansa. Modiluft started its operations in 1993 and was one of the first private airlines

post deregulation. It was also the first private airline during that time which provided three tier sitting

configuration in domestic routes. In 1996 the carrier ran into problem due to dispute between the two

partners owing to lease payment obligations. Modiluft never saw the day after the two partners fail to

resolve the dispute and it remained grounded until May, 2005. In 2004 the company renamed as Spice Jet

was acquired by Ajay Singh and Kansagra family and finally started its operation on Delhi- Ahmedabad-

Mumbai route on 24th May 2005. The goal of the firm at that time was to compete with the Indian

Railways air conditioned coaches to offer passengers a better deal.

Ajay Singh 1.0: 2005 to 2010

Spice Jet started its operation by leasing only two aircrafts in 2005, eventually the count was increased to

28 by 2010 while expanding the airline’s reach further in the domestic sphere.

In 2005 Spice Jet made a firm order of 20 next generation aircrafts from Boeing which was scheduled to

arrive in 2010. Due to its constant focus in becoming the India’s best low cost carrier Spice Jet became

third airline by market share only after Air Deccan and Indigo in 2008 only after three years of its

inception. The fleet size was increased constantly by leasing aircrafts and also by placing order, which

generally had a 5-10 years of arrival time. Ajay Singh in his first tenure took Spice Jet to a height where

its market share was 20%, second highest in the industry. It won many industry award for its highly

efficient operations and consistency in on time arrival and take off schedule. Since the airline was

continuously in an expansive mode fighting for market share it never saw positive profit figures during

this period. To sustain the momentum Spice Jet needed fresh funds which was given by Kalanithi Maran,

Sun Group owner, who saw future and potential in the Indian airline space.

Deep into Crisis: 2010 to 2015

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In 2010 Sun Group owned by media baron Kalanithi Maran bought 37% stake in Spice Jet from Ajay

Singh. The inconsistent profits of the airline made him to infuse further an equity of Rs 1500 crores which

increased his shareholding eventually to 58%. Maran was very well connected person in political spheres.

In an attempt to reduce cost he started replacing highly paid executive managers with his family members

which was not a great idea considering the high competition in the industry. “The airline had a

professional management in place but after Maran took over things started getting messy. A number of

top executives left or were nudged into leaving as the new promoters thought they were too expensive.

The board members, who understood the business and asked the right questions, were replaced by family

members,” said a former senior employee of Spice Jet. In the beginning of this period freshly infused

capital led the airline to become profitable in the first two years but it never put a sustainable model in

place and the airline again ran into huge negative profits in 2012 which reinforced replacement of senior

executives with his family members in order to cut cost. This led to series of negative decisions on part of

top management which finally led the airline into deeper crisis.

Spice Jet attempted to maximise the performance and productivity of its aircraft by increasing the number

of flights with the same number of aircraft. There was a time when they ran over 1000 flights with only

58 aircrafts in operation. Huge pressure was mounted on the staff and schedule and the planning did not

keep up with this level of operation.

In 2011 Spice Jet inducted 15 Bombardier Q400 turboprop small aircraft having capacity of 78 seats. The

aircraft was inducted into operation with a view to enter into tier 3 and tier 4 cities which was still an

undeveloped market. It had planned to connect 100 small cities airport which was clearly an over-

estimation of market in small airports, not well connected through roads and trains. It was also a

dangerous shift in the strategy of a low cost carrier which sticks to a single type aircraft policy in all the

routes it flies.

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Till December 2014 carrier had a total of 1861 flights cancelled and owed Rs.1600crores to vendors. The

carrier in 2015 made an audacious attempt by playing the volume game to fulfil the working capital

requirement and stay afloat. There were up to 25 announced flash sales in 2014-15 to attract the price

sensitive customers. The move backfired and did not get the momentum as expected since the existing

tickets were already low priced and Spice Jet planes had stopped being on time due to over utilization.

The consistent losses were overlooked in the hope of getting fresh equity from overseas investors. Carrier

was talking with many American private equity firms to bail out the airlines from its high losses in the

recent years. Institutional investors like TPG capital, Indigo Partners were very keen to invest in the

carrier and the deal had started to take shape when Dayanidhi Maran, brother of Kalanithi Maran was

accused by CBI in the famous Aircel- Maxis case. This led to a dilution in the credibility of the promoter

and hence the PE firms which earlier were interested backed out from their investment promises. It was a

serious set-back for the airline as it was already cash crunched and urgently in need of fresh capital to pay

off its long pending bills to oil suppliers and Airports. In addition to this, the airline also had signed 4.4

billion USD deal in 2014 with Boeing to procure 42 Boeing 737 aircraft of which deliveries starts in 2018

to satisfy the expansion need of airline at that time.

Spice Jet needed Rs.2100 crore capital infusion to stay afloat which was supposed to come from the

overseas investors. As the proposed investors had backed out and losses were getting bigger, it was forced

to return planes, laying off of employees and eventually cancelling planes. This virtuous cycle of cost

cutting led to severe cash crunch and it was not able to pay its vendors, oil suppliers, airports authority

and employees. DGCA and Airport Authority of India put a ban on Spice Jet till the payments were

cleared which seemed distant given the situation Spice Jet was in.

Ajay Singh 2.0

In March 2015 Ajay Singh acquired the shares of Kalanithi Maran after carefully examining the future

prospects of the airline and charting out a five year revival plan for the carrier. Change of hands in

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management proved beneficial for the airline as Ajay Singh was closely associated with the election

campaign of BJP, which was presiding at the center in 2015 and it was easier for him to use his political

connections and credibility to lift the carrier out of crisis. He met with various people from the

government and convinced the civil aviation ministry of his restructuring plan which eventually got an

approval from the government. DGCA, Airport Authority of India and public sector oil companies after

getting partially paid extended again their credit facility to the carrier under certain conditions on the

behest of government. One of the most important reasons for Ajay Singh to have faith in the revival of

airline and investing as much as Rs.1500 crore was the premium time and parking slots allocated to Spice

Jet in key cities which considering all other factors constant was an advantage over other airlines. Indian

airports allocate slots based on a lot of factors which includes age of airline, terminal capacity and number

of runways. Preference is given to older carriers over the newer ones when slots are allotted to various

airline for summer and winter schedules each year.

Focus was shifted to making the basics of the operations right. As the airline had lost its credibility in the

eyes of its customers, on time performance was monitored by the top management itself and any delay

was directly reported to Ajay Singh. In an industry where profitability margin was very low and

competition fierce overstaffing could be a major cost factor. In 2014 the carrier had a total of 5500

employees with a ratio of 140 staffs per plane where as the industry standard used to 90 staffs per plane.

Layoff exercise was laid down rationally to cut the employees number to 3800 in August 2015. Top

management had to justify their high compensation with their performance and many of them were asked

to leave the carrier on a gradual basis due to their poor performance in the past.

Airline operation was made leaner by dropping routes which were not profitable and well connected. The

reduction was made from 56 stations in 2013 which included 10 international operation to 41 domestic

stations and 7 international destinations showing the commitment of the management to profitability

rather than just growth. Flash sales were still offered by airline but important vacation dates were

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excluded in those sales. The hands on approach of the promoter led to a drastic improvement in passenger

load factor (PLF) in the range of 90’s soon after taking over. As it is said that luck favours the brave so

did happen with Ajay Singh as the global oil prices fell which helped reduce the overall operational cost

providing the airline much needed breather. Through these concerted efforts made in tandem with the

overall objectives of the carrier Spice Jet became a profitable airline with a net profit of Rs.407 crores in

2016. (Exhibit) Bringing the airline back on track now the question rises of its expansion and regaining

back its market share. Is the Spice Jet ready to start the war of market share?

Major Competitors in 2017:

The major players in this industry are IndiGo, SpiceJet, Air India (Domestic), Jet Airways, GoAir and

Vistara sharing an approximately 97% of the market share. According to January 2018 reports of DGCA,

IndiGo retained its market leader position with 39.7% market share. This section lists SpiceJet’s major

competitors in the airline industry in 2017. The financial performance of SpiceJet and its publicly listed

competitors are given in Exhibits.

IndiGo Airlines:

Since its inception in August 2006 in Gurgaon, IndiGo has grown from a carrier with just one plane to a

fleet of 155 aircraft today. The airline was founded by Rahul Bhatia and Rakesh Gangwal and it went

public in 2015. IndiGo currently operates flights connecting total of 49 destinations (41 domestic and 8

international). It operates in domestic air travel market as a low-cost carrier with focus on our three major

aspects – low fares, on-time operation and delivering a courteous and hassle-free experience. Indigo has

shown a positive trend in its PAT (profit after tax) and last year it registered a profit after tax of Rs.16,

591.88 million. It witnessed passenger traffic growth of 31.5% and its total revenue grew by 16.3%. Last

year it added total 24 new aircrafts to its fleet.

Jet Airways:

It was established in April 1992 in Mumbai. It began full-fledged passenger operations in 1995 and added

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international flights in 2004. The airline went public in 2005 and in 2007, it acquired Air Sahara.

Company has a fleet size of 104 aircrafts and it flies to 45 domestic destinations (includes flights operated

by Jet Lite (India) Limited, the Company’s wholly owned subsidiary) and 20 International destinations.

Last year it registered PAT of Rs. 39,043 Lakhs. The company follows ‘Guest First’ approach, which is

based on the key pillars of Choice, Connectivity, Convenience and Comfort, to provide an incomparable

service proposition for its guests.

Go Air:

Wadia Group established GoAir in November 2005 and now it maintains flights across 23 destinations. I

maintains a fleet strength of 23 aircraft. GoAir has positioned itself as 'the Smart People's Airline'. Its

theme 'Fly Smart' is aimed at offering passengers a consistent, quality-assured, and time-efficient service

through 'pocket-friendly' fares and its operation is based upon 3 principles - punctuality, affordability, and

convenience. GoAir registered PAT of Rs. 205.25 crores in 2016.

Vistara (TATA SIA Airlines Limited):

Vistara is a joint venture between Tata Sons Ltd. and Singapore Airlines (SIA) and Tata Sons holding has

the majority stake of 51% in the company and SIA holding has the remaining 49%. Vistara took to skies

in January 2015. In a span of three years, Vistara has expanded its network to 22 destinations and operates

a fleet of 17 aircraft.

Government Intervention:

The aviation industry has not always been so vibrant and appealing. Since the first flight took off from

Karachi to Delhi in December 1912, it is constantly undergoing the changes. Indian Government has been

one of the primary change agents throughout this journey.

At the time of Independence of India, Nine Air Transport Companies were operational. namely Air

Service of India, Deccan Airways, Ambica Airways, Indian National Airways, Bharat Airways, Tata

Airlines, Mistry Airways and Orient Airways. But after the independence all these airlines were merged

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to form Indian Airlines and Air India. With this started the era of government monopoly in this sector.

Government also introduced strict policies to block foreign ventures.

But this all changed when government opted to de-regulate this industry and embraced open sky Policy in

1990. This change of stance from the government encouraged various overseas players to enter in Indian

market and minimized the government intervention.

Taxation policy of the government:

Aviation industry can provide great value to nation by facilitating the business which broadens the tax

base for the government. But still this industry is seen as the revenue source instead of the revenue

builder. Government imposes service tax on tickets as well as landing and navigation charges, even

though this fails to comply with the International Civil Aviation Organization (ICAO) guidelines.

Currently, India has a service tax at 18% after the introduction of GST. The tax liability on the aviation

industry is expected to up to 15,000 crores annually. Moreover, government levies the taxes on domestic

fuel. It is damaging for the industry as fuel cost can increased by 30%. There is an excise duty in the

range of 8 to 14% on the top of this. Because of these policies the fuel costs for Indian airlines add up to

45% of total operating costs when the global industry average is 33%.

Changing Scenario:

In recent years, there has been an effort to revamp the civil aviation policy by the government.

Government is fine-tuning some rules which were becoming hindrance to the growth of the sector.

Previously a company required to have experience of 5 years in domestic operations before starting

international flights. This rule has been scrapped to make it easier for the new entrants to commence their

international operations. Government is trying to regulate the ticket prices by capping the fare of one-hour

long flights at Rs 2,500 and Rs 1,500 for half-an-hour flights to make the domestic flights more

affordable. The government raised foreign direct investment (FDI) limit in scheduled commercial airlines

to 100 per cent from 49 per cent to aid the modernization.

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Government Schemes:

UDAN Regional Connectivity Scheme:

The regional connectivity scheme is for the airways of length between 200 to 800 km and without any

lower limit set for mountainous, remote, island and security sensitive regions.

The Government will offer enticements to companies to start new flights to neglected smaller cities and

towns by providing Viability Gap Funding to make these operations profitable.

It will bolster air connectivity by promoting affordable flying and balanced regional growth. The

distributions will be spread evenly across 5 regions - North, West, South, East and North-East with a cap

of 25 percent. Government also set up the Regional Connectivity Fund (RCF) with a corpus of Rs. 500

Crore per year to compensate the damages sustained by airlines for connecting un-served airports. No

landing charges, parking charges and Terminal Navigation Landing Charges will be imposed for regional

connectivity scheme flights.

UDAN scheme and SpiceJet:

Under the iconic UDAN (Ude Desh Ka Aam Naagrik) yojana, Five Indian airlines including SpiceJet

were awarded 128 Indian regional routes by the government of India for launching flights in March 2017.

Spicejet is the first major airline to launch flights on the Regional Connectivity Scheme route. During the

first phase of the Regional Connectivity Scheme (RCS), SpiceJet had proposed for 11 routes, out of

which, six were awarded. Out of these six routes, markets of Kandla, Puducherry, Adampur and Jaisalmer

were unserved and the remaining two Kanpur and Porbandar were under-served, all these routes are now

operational. Airports that do not have daily flights are categorised as unserved airports, while the airport

that has missed two consecutive flight schedules is classified as an under-served airport.

SpiceJet has employed a 78-seater Bombardier Q400 regional jet to cater to the two new routes: Mumbai-

Porbandar-Mumbai (under-served) and Mumbai-Kandla-Mumbai (unserved) and these routes are being

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catered to since July 10, 2017. The new Porbandar flight route with RCS seats was planned to be operated

at Rs 2,250 (all inclusive) whereas the Kandla routes at Rs 2,500 (all inclusive).

The eligible airlines were offered viability gap funding (VGF) under the UDAN scheme. Meaning, the

operators would be subsidised with about Rs200 crore. SpiceJet said it is the only airline that didn’t seek

VGF or the subsidy from government of India under this UDAN scheme. On this, Ajay Singh said the

reason for not accpting the VGF or subsidies so far was the fact that the routes being operated by SpiceJet

under the RCS scheme were economically feasible. The main aim of UDAN scheme was to connect the

unserved and under-served markets while making air travel more affordable for middle class India. In one

of his interviews, Mr Singh said, "On UDAN, our philosophy at SpiceJet is that wherever viability gap

funding (VGF) is not required, we will not take it because the government should use the money where it

is required. So far this has proved to be right because all the sectors we are flying as yet are financially

viable without that viability gap funding,"

In a March 2017 report, the aviation minister Ashok Gajapathi Raju said, “For 21 months running we

have had 20% plus growth in passengers... now with these efforts, we will contribute to it because more

people will be able to fly. I think within four to six months everything (flights) will become active.”

In January 2018, after the second round of UDAN RCS bidding, SpiceJet won 17 proposals and 20 new

sectors. "Out of these 20, 15 will cater to unserved markets of Kannur (Kerala), Darbhanga (Bihar), Ozar

(Nashik), Pakyong (Sikkim), Kishangarh (Rajasthan), Lilabari (Assam), Thanjavur (Tamil Nadu),

Bokaro(Jharkhand) and Solapur (Maharashtra) whereas 5 will be for underserved markets of Hubli

(Karnataka) and Jaisalmer (Rajasthan),'' said the SpiceJet airline in one of the press conferences.

Following this, the Finance Minister of India, Arun Jaitley stated that the low-cost air connectivity

scheme, Regional Connectivity Scheme, will connect 31 unserved helipads and 56 unserved airports after

which SpiceJet jumped 15% to Rs 142 on BSE in intra-day trade. According to Arun Jaitley’s

announcement during the 2018-19 Budget, the growth rate of domestic flyers’ traffic in last three years

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became 18% per annum and the Indian airline operators placed purchase orders for more than 900

aircrafts. The connectivity operations under the UDAN scheme have already started at 16 airports, of both

unserved and under-served kind.

So far, being enthusiastic about the UDAN scheme since the very beginning and investing time and

money for furthering this noble government initiative has proved to be a good strategy for SpiceJet and

has brought about many positive impacts. In the long run however, will this decision bear delicious fruits

for the company or will it become the cursed apple for SpiceJet’s Adam? While not accepting the subsidy

might have helped the company build a good image and reputation for itself among the nation as well as

the government, might it result in lost opportunity and future accumulative costs?

Exhibits:

References:

 http://www.iata.org/pressroom/speeches/Pages/2012-07-25-01.aspx
 https://edition.cnn.com/travel/article/india-aviation-industry/index.html
 https://qz.com/707487/modi-governments-new-policy-gives-wings-to-indian-civil-aviation/
 https://www.thehindubusinessline.com/economy/logistics/500crore-annual-subsidy-to-fuel-regional-flights-aviation-
secretary/article8742228.ece
 https://economictimes.indiatimes.com/articleshow/53004275.cms?utm_source=contentofinterest&utm_medium=text
&utm_campaign=cppst
 http://www.civilaviation.gov.in/sites/default/files/Final%20Regional%20Connectivity%20Scheme%20%28RCS%29.p
df
 http://www.apaoindia.com/?page_id=185
 http://www.businesstoday.in/current/graphics/spicejet-crisis-timeline-of-key-developments-latest-
updates/story/214943.html
 https://economictimes.indiatimes.com/magazines/corporate-dossier/can-promoter-ajay-singh-resurrect-
spicejet/articleshow/46549938.cms
 http://www.moneycontrol.com/news/business/companies/how-ajay-singh-is-restructuring-spicejet-after-takeover-
1275223.html
 http://www.financialexpress.com/industry/spicejet-says-looking-ahead-to-normalcy/30517/
 http://www.businesstoday.in/magazine/features/spicejet-ajay-singh-working-tirelessly-for-airline-
turnaround/story/222557.html
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 http://profit.ndtv.com/news/corporates/article-struggling-airline-spicejet-sold-to-co-founder-ajay-singh-727639
 http://www.financialexpress.com/archive/spicejet-places-44-bn-order-for-42-boeing-737s/1233064/
 https://www.hindustantimes.com/business/family-interference-officials-exodus-why-spicejet-story-lost-the-plot/story-
c1DvqrrfthYidemED6tnQI.html
 http://www.livemint.com/Opinion/RFniS7EZss6MSt02BfPOIL/Six-Lessons-from-the-SpiceJet-crisis.html
 http://www.financialexpress.com/archive/spicejet-places-44-bn-order-for-42-boeing-737s/1233064/
 https://www.businesstoday.in/magazine/features/spicejet-ajay-singh-working-tirelessly-for-airline-
turnaround/story/222557.html
 https://economictimes.indiatimes.com/magazines/corporate-dossier/can-promoter-ajay-singh-resurrect-
spicejet/articleshow/46549938.cms
 https://www.hindustantimes.com/business-news/spicejet-set-to-launch-flights-under-udan-scheme-next-month/story-
xcmLhI3NxF3et8dPJ8tiJM.html
 https://timesofindia.indiatimes.com/business/india-business/spicejet-to-launch-20-new-udan-
routes/articleshow/62650910.cms
 http://www.business-standard.com/budget/article/spicejet-surges-as-government-proposes-udan-expansion-
118020100609_1.html
 https://www.ndtv.com/business/udan-routes-financially-viable-without-viability-gap-funds-ajay-singh-1805060

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