SpiceJet Creating New Cargo Subsidiary Airline SpiceXpress

SpiceJet is moving closer to officially hiving off its cargo business to a new airline, SpiceXpress. While SpiceXpress has long been the brand for the low-cost airline, it will soon have its own Air Operators Certificate (AOC) and operate a separate carrier. Let’s find out more.

SpiceXpress kicked off operations in October 2018 and has grown rapidly in the pandemic to meet demand. Photo: Getty Images

On the move

During its annual report in July, SpiceJet talked about plans of hiving off its cargo business to become a separate airline. Just a month later, this plan is coming close to reality, with SpiceJet using a slump sale to separate SpiceXpress as its own airline, according to Moneycontrol.

SpiceJet has approached the government for a No-Objection Certification (NOC) for a new carrier, SpiceXpress and Logistics. This freight airline will see aircraft, trademarks, contracts, and everything else transferred from SpiceJet in a lumpsum and without item-wise values assigned. A slump sale will allow the split to happen more quickly and help stabilize the airline’s finances.

While SpiceJet remains on the brink of bankruptcy, SpiceXpress turned a profit this past quarter. Photo: Getty Images

SpiceXpress is valued at ₹2,555.77 crores, and SpiceJet will get the equivalent shares in the new airline. This means it will be eligible for dividends and contracts from SpiceXpress, providing a steady stream of revenue for the debt-saddled passenger business. Notably, the freight arm turned ₹30 crore profit in the first quarter of 2021-22 (April-June), even as the industry suffered.

Move

SpiceXpress currently operates a fleet of five freighters, two 737-800Fs and three 737-700Fs. All of these are converted freighters, which means they are between 21 and 23 years old, but still have a long life as cargo jets. Additionally, SpiceXpress also has wet-leased several jets from Hi Fly for one-off contract cargo flights to Europe and Central Asia but does not operate any of these itself.

All of these planes will now become part of the new airline and operate separately. However, SpiceJet is still planning to provide transportation services, connecting flight belly cargo space, and the entire management time. This means the new carrier will have support from the parent and make money as a freight carrier.

Once the sale is complete, SpiceJet can use cash from SpiceXpress to reduce its own losses and become more efficient. Photo: Getty Images

Until now, India only had one dedicated freight airline, Bluedart, since SpiceXpress did not have its own code. However, with the market heating up with IndiGo’s entry next year, SpiceXpress is hoping to become a major player in its own right.

Bluedart was India’s only active freight airline until 2018, when SpiceJet entered the foray. Photo: Venkat Mangudi via Wikimedia Commons

Important

Since the pandemic hit, demand for cargo has never been higher, while capacity from India has plummeted due to the lack of international flights. This has given domestic players the chance to greatly increase their market coverage and tap into fresh demand around the globe. SpiceXpress has grown its leased fleet rapidly, while Vistara has flown as far as Seoul for cargo missions. Expect to see this market grow rapidly in the next few years as demand only rises.

What do you think about SpiceXpress’ plans? Let us know in the comments!

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