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Blue Ocean Strategy – SpiceJet flying to destinations unchartered by rivals


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SpiceJet is adopting Blue Ocean Strategy to overcome stiff competition in Indian market.

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Blue Ocean Strategy – SpiceJet flying to destinations unchartered by rivals

  1. 1. Analysis & Outlook Blue Ocean Strategy – SpiceJet flying to destinations unchartered by rivalsTough competition, margin pressures and too many big carriers flying in the regular busiestroutes like Singapore, Kuala Lumpur, etc has forced the Indian low-cost carrier (LCC) SpiceJetto spread its wings to destinations like Kazakhstan capital Almaty, Uzbekistan capital Tashkent,Chinese city Guangzhou and Chinese special administered region (SAR) Macau that are leftunchartered by major full service peers and sought government nod to fly to 10 new destinationslike this.SpiceJet already flies to war region Kabul Afghanistan, tourism-cum-trade centers ofColombo, Dubai and Kathmandu and the airline is expected to fly to Male, Riyadh and Dhakasoon. "We follow a blue ocean strategy for international flights which means flying to placeswhere not too many airlines go. We would like to go to more points in China," SpiceJet CEONeil Mills said. Mills is targeting routes where the airline will have a first-mover advantage atleast six months to one year head start, particularly where its competitive rivals other IndianLCCs are not flying, not much competition and where setting up operations and gettingpermission is difficult, due to tough bilateral rules.SpiceJets strategy to fly to the above saiddestinationswith no competition from the other Indian rivals could benefit itas there is demandon these routes which will allow it to charge rewarding fares and increase profitability.SpiceJet Blue Ocean Strategy is to develop new markets instead of competing with experiencedbig players in the established routes which are no longer profitable due to margin pressures andother costs along with cut throat competition. But the Blue Ocean Strategy of flying to war tornAfghanistan Capital Kabul carries a huge risk and only three Airlines fly to this destination butthere has been significant medical tourism traffic from Kabul into India along with strong tradebetween the two countries, basic supplies are carried mostly through air rather than any othermode of transport and with supply constraints allowing airlines to charge between Rs 10,000 toRs 29,000 for a one-way flight that took just two hours — making it one of the most profitableroutes from India. Flying to former Soviet Republics like Uzbekistan, Kazakhstan, etc is also agood move because there have been good growth in terms of trade between the countries in thisregion and India and more over close to 1000 students from India are going to these countries forstudying medicine and also students from these countries are also coming to India for studies aspart of exchange programs that include cultural, academic, scientific, etc. National carriers fromUzbekistan, Kazakhstan are flying to India since past few years and there is also goodopportunity for growth in tourism traffic between India and various countries in the Central Asiaas tourism is being mutually promoted by all the nations.A look at other international routes announced by SpiceJet like Madurai-Colombo, Delhi-Dhaka-Rangoon/Yangon, Delhi-Riyadh, Delhi-Guangzhou, and Trivandrum-Male reinforces its BlueOcean Strategy of flying to unchartered routes not served by competition. Large Tamilpopulation in Si Lanka along with strong business links has encouraged the airline to connectMadurai and Colombo and expects demand to be strong. Delhi Riyadh route is again significantas there is large movement of labor as many big contracts won by Indian companies andMuslims from India travel to this country in large numbers for this purpose.Guangzhou isRajesh Prabhakar Analyst Bio @
  2. 2. Analysis & OutlookChina’s third most important city and it’s the manufacturing capital and lots of Indian Tradersfrequently travel to this city and no Indian airlines fly to the city and Macau is famous for itscasinos and tourism.SpiceJet is also experimenting with this first-mover advantage within Indiatoo by flying to smaller towns and cities and connect them with multiple metros and larger cities,where no Indian airline flies at the moment. SpiceJet already connects 16 destinations, includingJabalpur and Amritsar, as well as Hubli and Tirupati, among others and it is doing this throughits acquisition of the 78-seater Bombardier Q400.SpiceJet adoption of the Blue Ocean Strategy of flying into new destinations underserved by itsrivals with good revenue potential and taking big risks will only work for shorter time as firstmover advantage will be lost once all the competitors start entering into these destinations oncethey see the profitability in those routes. So SpiceJet have to make money fast and hope that thebilateral agreements between India and nations like Saudi Arabia, China that makes it hard forgetting licenses by the other Indian rivals will be there for some more time.Volatility in aviationturbine fuel (ATF) prices which is imported into India is another concern as most of the IndianAirlines are struggling to keep their costs under control in terms of fuel expenses. Maintainingtwo different types of aircrafts new-generation Boeing 737 for playing between major routes andBombardier Q400 for flying to smaller cities and minor routes is like operating two low costcarriers which will put pressure on managing costs and technical maintenance costs will alsoraise. Another risk is the domestic strategy of flying to smaller cities and towns which are pointto point as Air Deccan earlier failed to make profits in this model.But SpiceJet is forced to takethese risks and adopt a Blue Ocean Strategy as the airline in the last financial year made losses ofaround Rs 600 croreand it picked up 12 million passengers. Neil Mills, the current CEO isaggressively looking to turnaround the airline with these strategies.Rajesh Prabhakar Analyst Bio @