SpiceJet’s Revenue Strategy for Profits: Don’t Fly

July 1, 2021


'Indian airline SpiceJet has yet to return their Boeing 737 MAX fleet to the sky. Is it because they'll make more or lose less by NOT flying them?'

To create profits in your business your formula is simple: Either sell more of what you have or charge more of whatever you sell.

Indian airline SpiceJet is taking a but different approach: Don't sell tickets...and don't fly.

What?

At least that's what they're doing with their 13 Boeing 737 MAX planes that have not flown since they were grounded some 27 months ago...

Does SpiceJet Want Boeing to Shell Out $165 Million in Compensation Instead of Flying the Planes?

If you are to believe a report by Bloomberg/Chicago Business that's pretty much exactly what it seems like.

India’s second-biggest budget carrier booked other income of 12.3 billion rupees ($165 million) in the eight quarters through March. That was the amount it expected to get in compensation from Boeing for not being able to fly its 13 Max aircraft, helping the company to trim its losses during deeply challenging times.
SpiceJet is the only Indian airline that operates the Max. With firm orders for 142 more, it’s also one of its biggest customers globally. Yet the carrier hasn’t asked regulators to lift the flying ban in India, a person familiar with the matter said. There’s no clarity on why it has held back, and it would take at least a month after applying to get approvals in place, the person said, asking not to be identified as the matter is confidential.

The $165 million is the reported amount that SpiceJet expects to receive from Boeing when the 737 MAX was grounded globally due to the 2 crashes that killed 346 people.

The apparent rationale? Keep the aircraft on the ground...and thus reduce the cost of operating them as the airline works to become profitable (they haven't been in several years even before The Pandemic).

Would Boeing Even Pay SpiceJet if They 'Purposely' Kept Their MAX's on the Ground?

Any carrier that had/has the 737 MAX in their fleet has every right to be upset and want compensation.

But IF....IF SpiceJet is just waiting for their payout and not even trying to operate the planes Boeing has every right to be pissed and NOT want to pay them:

In its annual results released late Wednesday, SpiceJet said management was confident of collecting the compensation from Boeing. However, its auditor Walker Chandiok & Co. said there was “no certainty” that the income would be recognized, reiterating a previous stand and that of SpiceJet’s erstwhile auditors.

SpiceJet Has Continued to Struggle as the Pandemic Has Raged in India

Even with their 737 MAX's still grounded SpiceJet has operated way under capacity. Not surprising...most carriers (until very recently) have had similar struggles. But SJ is based in India...and Covid has taken a heavy toll as of late...making their issues worse.

Make no mistake: Everyone has suffered...not only because of the Pandemic but the also the 737 MAX grounding...not to mention (and most importantly) the loss of life in the MAX crashes.

IF true...SpiceJet needs to act like a real company.

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About the author

Kenneth Holland is an internet publisher with 20 years experience and the founder of SkyGoFly. He is also the original founder of Airnation.net.

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