Global tie-ups

“As Europe’s preferred airport for the transport of temperature-sensitive products, Brussels Airport-certified IATA CEIV Pharma has more than 30,000m² of temperature-controlled areas,” observes Arnaud Feist, CEO, Brussels Airport Co. “As of today, we have already shipped more than 10 million doses of vaccine from our Brucargo platform to destinations around the world. In this context, we are pleased to be partnering with SpiceJet and to be able to offer our expertise for the future distribution of vaccines from India within Europe and beyond. Together, we will make our contribution to the solution to this global health crisis.”

Further, as part of its continued efforts to take up the responsibility of transporting the Covid-19 vaccine to every part of the country as well as outside India, SpiceJet has partnered with GMR Hyderabad Air Cargo, Om Logistics and Snowman Logistics, among others. With a network spanning 54 domestic and 45 international destinations and a fleet of 17 cargo planes, SpiceXpress is capable of flying over 500 tonnes of cargo per day to both domestic and a wide list of international destinations. The airline has also tied up with global leaders in cold chain solutions, offering active and passive packaging with dedicated equipment, to perform seamless cold chain operations.

SpiceXpress has the capability to transport sensitive drugs, vaccines, blood samples and medicines in controlled temperatures ranging from -40°c to +25°c. Besides, the airline also offers other benefits, such as a network of warehouses equipped with deep freezers, to enable the change of cool packs, and ground vehicles and containers to help transport sensitive cargo.

Ever since the lockdown began, SpiceJet and its cargo arm, SpiceXpress, have worked to ensure that the country’s supply chain remained intact. The airline has helped in the transportation of vital goods and medical supplies to all corners of India and the world. SpiceJet has operated more than 12,600 cargo flights since the lockdown began and carried around 1,02,000 tonnes of cargo. SpiceXpress has the capability to provide door-to-door deliveries to over 12,600 pin codes across India. It has transported multiple vaccine consignments from Pune to different Indian cities. They include 276,000 doses to Guwahati, 996,000 doses to Kolkata, 3,72,000 doses to Hyderabad, 480,000 doses to Bhubaneswar, 648,000 doses to Bengaluru, 552,000 doses to Patna and 408,000 doses to Vijayawada.

“Today is a historic day in our country’s fight against the pandemic and I am proud that India’s first consignment of the Covid vaccine was carried today by SpiceJet from Pune to Delhi,” said Singh as India launched its great vaccination drive. “On Day One, SpiceJet was shipping four million doses of Covishield vaccine weighing close to 11 tonnes to eight different cities, including Guwahati, Kolkata, Hyderabad, Bhubaneswar, Bengaluru, Patna, Vijayawada and Delhi. As India gets ready for the biggest vaccination drive in its history, the SpiceJet family hopes and prays for a quick, complete and decisive victory in this fight against corona virus.”

Concerns remain

“The Indian aviation industry has seen a gradual recovery in demand,” affirms Achal Kumar, analyst, HSBC Securities & Capital Market (India), talking about Covid-19, in her mid-December report on the Indian aviation sector. “The quarter to end-December is seasonally busy and yet the traffic was limited at 60 per cent versus last year. We think there is enough demand for leisure, and visiting friends and relatives, to benefit the industry after the vaccine comes.” 

The HSBC report has suggested a 25 per cent increase in SpiceJet’s share price from Rs99 to Rs125. For one, the Ministry of Civil Aviation has raised the domestic capacity limit from 70 per cent to 80 per cent since 3 December. “We think the industry should be able to fly this incremental capacity on its average network load factor, albeit at lower fares. Given that the costs of this incremental capacity would be limited to fuel, airports, and part of maintenance and salary, we think it could be profit accretive,” suggests the report.

However, weakening traffic mix and the slow recovery in international demand remain concerns. “High-end corporate travel could see a structural decline as technology could replace some portion of corporate travel. 

International traffic is expected to recover at a much slower pace, which creates uncertainty around the deployment of international capacity. In the event the industry decides to deploy it in the domestic market, it could result in an oversupply situation in this market.”

Another positive for SpiceJet is the reinstatement of grounded Boeing aircraft. The US Federal Aviation Administration has allowed 737 Max to return to the domestic skies, after being grounded for about two years, after two fatal crashes. In the case of SpiceJet, it has been incurring maintenance and other costs on its 13 grounded 737 Max aircraft. As such, every country’s regulator will have to give separate approvals.

In India, the Directorate General of Civil Aviation could possibly take two-three months to give its approval. These Max aircraft are about 15 per cent more fuel-efficient. Hence, the potential return of these planes augurs well. Further, the outlook for SpiceJet would improve when it receives accumulated claims of Rs950 crore pertaining to its 13 grounded Max aircraft. With clarity on return of the Max aircraft, the settlement process could get closure and give SpiceJet some much-needed cash flow.

According to plans, SpiceJet hopes to focus on the cargo business to boost its revenue, going forward. Also, the airline enjoys higher margins in the cargo business compared to the passenger business and, moreover, business visibility is higher and is more consistent. In fact, higher revenue from the cargo business has helped the airline cut its losses for the quarter ended September 2020 (Q2 2020-21). SpiceJet’s revenue from the cargo business increased by 39 per cent in Q2 2020-21 to Rs328.54 crore over Q1 2019-20. 

“The carrier will continue to expand its cargo business, tapping into burgeoning demand in the sector,” says Singh. The airline also emerged as the top international cargo operator in October 2020 from India’s largest airport, New Delhi’s Indira Gandhi International Airport.”