SpiceJet Through Turbulent Years

Wednesday, 24th December 2014 at 05:02am

SpiceJet's rise to one of India's major airlines was like a fairy tale, as it failed twice in a row in its attempt to break into the country's aviation industry dominated by then by the state flag carrier, Air India.

Today, it is the country's second largest airline by domestic market share.

Before it became a force to reckon with in the country' commercial aviation industry, SpiceJet went through a series of failed attempts, first in the early1990s and then, in early 2000s.

The airline venture started in 1993 as ModiLuft, a portmanteau of the two investors' name, India's industrialist, S K Modi and Lufthansa of Germany. During that time, start ups were started to sprout in India, among which were Damania Airways, Jet Airways, East-West, and Sahara Airlines.

Like most of its contemporaries, ModiLuft folded up in 1998 reportedly due to the irreconcilable differences between the Modis and Lufthansa.

In early 2000, a British investor, NRI Bhulo Kansagra injected capital into the dormant airline using the same license that the regulator issued to ModiLuft, giving birth to the Royal Airline. However, the company was unable to take the airline off the ground due to insufficient capital that would sustain its maiden operations.

In 2004, Ajay Singh raised funds to revive the airline, which is going to operate on a low-cost business model and christened it SpiceJet. In the following year, in May 2005, it commenced its maiden operations with its inaugural flight, taking off from Delhi's Indira Gandhi International Airport to Mumbai.

SpiceJet's journey has never been smooth as it has always been looking for investors since then. It sought partnership with GoAir's Wadi Group, IndiGo's Rahul Bhatia, and Jet Airways' Naresh Goyal.

Eventually, it was able to convince IndiGo's Kansagra and global investor Wilbur Ross, the renowned American investor on failed companies. However, by 2010, both investors sold their stakes to Kalanithi Maran of Sun Group. The founder, Ajay Singh, himself, exited from the venture, leaving Sun Group sole ownership.

Sun Group, being new to aviation business, has a hard time steering the airline to profitability. SpiceJet has since been struggling amidst tough competition, especially in the domestic sector.

By: Pete Lee.