Evolution and Growth of SpiceXpress – A Case of Growth and Market Leadership through adversity, challenges and a slowing economy.

Description

SpiceXpress was officially launched in 2018. From an ancillary-revenue-generating unit to SpiceJet Ltd., headquartered in Gurugram, Haryana, SpiceXpress has transformed into the region’s leading cargo airline, positioning itself as the most respected cargo carrier in the region. This transformation happened through one of the most challenging phases for airlines across the globe. The grounding of the Boeing 737 Max had proven challenging enough for the airline; additionally the contraction of economic activity through 2020 and 2021 put the airline through even more stormy skies.

Background

Back in 2018 SpiceJet used to carry cargo only in the passenger belly of its 50 odd aircraft serving as an ancillary source of revenue to the company. SpiceXpress was a niche Cargo operator then, with BlueDart being the only Indian company operating freighters. The mere thought of operating a freighter would have been termed ludicrous then – so much so that induction of freighters was considered to be an error of judgment by industry analysts; but SpiceJet envisioned long term value and went ahead with its decision of inducting freighters & named the division, SpiceXpress.

Goal of the Organisation

To become a world class air logistics company known for its innovation, service excellence and reliability.

Strategy and Actions

In September 2018 arrived the first Boeing 737-700 freighter aircraft. By the end of 2019, SpiceXpress had inducted a fleet of 5 Boeing freighters operating regular flights for marquee clients like e-commerce giants and International Express operators on domestic as well as international sectors. This ensured that the airline and SpiceXpress had some base-loads to support its earlier criticized Freighter business.

SpiceXpress was well-poised in the market with a combination of Boeing 737 freighters, and belly-cargo space on the Boeing 737 and Bombardier Q400 passenger flights. The airline could reach all the corners of the country, especially with support from a growing passenger customer base that had a CAGR of over 12% at the time. The cargo business was growing as well.

SpiceXpress started putting together a full-fledged team and functions to run the show that included: Ground Operations Airport, Ground Operations Door to Door (for B2B customers), Domestic and International Sales teams, Customer Service, IT with a focus on Automation and Technological advancement, Cargo Operations Control and Command Centre, Finance and Others…

SpiceXpress completed a herculean task of expanding its last mile connectivity via owned and third party infrastructure and by increasing its reach from 1,100 pin codes to over 13,600 pin codes spanning the length and breadth of India. The SpiceXpress team met this target within months to provide better customer service and increase customer participation.

The network expansion was followed by a phase of driving Operational Excellence and Customer Service Superiority. To do this, each and every shipment was tracked to closure. This entailed putting a 24X7 control tower in place tracking over 50,000 shipments per month. The efforts led to an overall Market-Leading ‘On – Time Delivery Service Level’ of 97%. New benchmarks were set in the industry. Customers with extremely time-sensitive cargo started to place their trust in SpiceXpress. The volumes surged comprising of e-commerce merchandise, Mobile Phones, Laptops & Tablets, Network equipment, Cold Chain Pharmaceuticals, Perishables and more.

To further boost customer confidence, in-house real time shipment tracking system was developed – ‘SpiceTag’ and various IT initiatives were taken like implementing of Sales Force and a dedicated SpiceXpress.com website to improve productivity and simplify operations.

However, all was not well. SpiceXpress started staring at losses. The challenge started grew tougher and tougher when the B737 freighter routes started to look unviable. By the October Quarter of 2019, SpiceXpress was stuck with non-profitable routes – a fleet of B737 freighters doing scheduled Operations with only directional traffic. It was poignant that the domestic air cargo industry was neither ready for pure freighter movement nor for palletized cargo movement on the door-to-door mode, the base loads earlier created by the e-commerce and International Express companies was not enough to make the overall operations profitable. To overcome this hurdle SpiceXpress introduced Bombardier Q400 aircrafts to create a hub spoke model to connect the smaller stations with the major metros by utilizing the combination of B737F and the converted Q400 aircraft. For example connecting the North-Eastern states to Kolkata. This gave SpiceXpress the flexibility of aircraft capacity by utilizing the B737 freighter fleet for international routes by connecting India to Kuwait, Abu Dhabi, Almaty, Bangkok, Manila, Shanghai, Dhaka, Kathmandu, Baghdad, Cairo, Jeddah, Tashkent, Iraq, Hangzhou, Hong Kong, Singapore, Rangoon, Muscat, Kuwait, Bahrain, Moscow and Frankfurt.

Along the journey, SpiceXpress signed up with over 840 Business Partners in India, providing employment and business opportunities to entrepreneurs. The large Domestic network of SpiceXpress provided an excellent reach to Agri and Pharma shippers and supported the Krishi Udaan Scheme – An initiative by the Government of India to assist farmers in transporting Agro products improving their value realisation during the Covid-19 Pandemic. When Covid 19 struck in early 2020 and the world went to a complete stand still, many would have written off the aviation sector. The entire logistics and freight industry was in disarray. The Shipper, Agents, Forwarder, International and Domestic governments, Importers and Exporters did not know what to expect. Local administration could not effectively allow essential services to operate. The industry was plagued with the fear of the unknown, the lockdown, the uncertainty, grounding of flights, loss of jobs, loss of income, and increased expenditure.

Majority of cargo was moved via the passenger aircrafts in the belly space which due to global lockdown had completely stopped. The customers were left high and dry with no means to transport cargo and with a shortage of freighter capacity globally SpiceXpress saw this as an opportunity to introduce Cargo on seat for the first time in India to meet the demand of Domestic and International customers.

The Indian freight industry is estimated at approximately 8 billion USD and more than 95% of the International cargo from India was being carried by foreign carriers. Since the pandemic completely grounded all flights, SpiceXpress took a calculated risk and decided to induct its first wide body aircraft, an Airbus 343 in August 2020 to foray into the International Markets with capability to reach Europe and the United States. Within less than a year, the airline has 8 wide body aircraft in its fleet including Airbus 343, Airbus 332, Boeing 767, and Boeing 777. Backed by its tech backbone & world class infrastructure to carry perishable/pharma/cold chain/temperature sensitive cargo, SpiceXpress today is India’s largest Cargo Airline. The SpiceXpress Team with limited previous knowledge of this new format of operation – wide-bodied freighters, passenger-converted freighters and cargo wide body aircraft, began running Non- Scheduled operations. The team worked round-the-clock during the extremely challenging times of the Pandemic. The team navigated through these difficult times where the policies of all the countries kept changing and continued to remain fluid. This severely impacted the operational and commercial planning. The Team did not only overcome these hurdles but also learned to thrive and expand its business.

At the start of the pandemic SpiceXpress was a Non-scheduled charter operator and now has regular flights to major European hubs like Frankfurt, Brussels, and Liege, carrying pharmaceuticals, automotive parts, ecommerce and other goods. SpiceXpress has expanded even further, leveraging the fleet of wide body aircraft and has connected South East Asia to the United States, Hong Kong & China to Europe and recently entered into the Australian Market connecting it to Malaysia & Singapore.

SpiceXpress has regular flights to major cities in China, African countries like Nigeria and South Africa and large manufacturing hubs for South East Asia like Vietnam, Bangladesh, and Thailand.

SpiceXpress has assisted The Government of India and various international customers by supplying oxygen concentrators, ventilators, PP Equipment and maintaining critical supply chains. SpiceXpress has transported the largest volume of Covid-19 vaccine in the domestic market. Additionally, SpiceXpress has developed in-house capability to monitor the temperature of highly sensitive cargo like the vaccines on a real time basis. The product is named “Spice Sense”.

The numbers concur with the initiatives – Within 3 years of launch, SpiceXpress had transformed from an entity making losses to a lifeline for SpiceJet. Revenue from cargo operations soared 518% to Rs 1,117.50 crore during FY2021, recording a profit of Rs 130.90 crore for the full year as against a loss of Rs 134.20 crore in the previous year. The Government of India has been supportive of Indian airlines and has helped with major policy changes with focus on providing the Indian airlines with level playing field when competing with legacy foreign carriers.

Achievements

• India’s Largest Cargo Airline
• SpiceXpress achievements were recognised and awarded by the industry:
  • Covid Hero of the Year 2021
  • Customer Service Excellence Award 2021
  • Best Brand Activation 2021
  • Asia Freight Terminal, Hong Kong’s Outstanding International Operator
  • High Volume Upliftment Airline – AAICLAS

Success Factors

• Relentless Customer-Centric Focus
• Speed to Market
• Investment in Operational Excellence
• Dedicated Customer Service
• Leveraging IT
• Flexible Operations
• Finding opportunities in adversity
• Recognising the efforts of partners in the Supply Chain through the SpiceXpress Partners Awards 2021
• Strategic Partnerships with the Best in Cargo – B Medical Systems, Global Entrade, Arctic Refrigeration, Index Logistics, Shadow fax, Delhivery Express, Snowman, Nayak Aviation,Om Logistics and many more

Way Forward

• SpiceXpress is actively testing Drone technology for last mile critical deliveries and this could be a game changer moving forward
• Spicejet Ltd has announced spinning off SpiceXpress as a separate cargo arm. This will provide even more flexibility to SpiceXpress
• SpiceXpress is expanding into allied businesses within the logistics space
  • It is the first cargo airline to announce a Free Trade Zone at Hyderabad International Airport
  • It is further expanding into warehousing and distribution
• SpiceXpress in July 2021 launched a Multimodal product ‘Air-Road’. This product ensures a low transit time with a low cost