SpiceJet Setting Up Hub In Ras Al Khaimah, UAE

I think the viability of their RAK operation depends on a number of factors.

I can see why they are venturing into this-

India UAE has a fixed demand and the mix of transit and O&D customers should make filling a 737 not too challenging.

With their low fares, I see SG stimulating new demand from the smaller tier 2 and tier 3 cities verus the major cities such as Delhi and Mumbai that are well served by existing carriers. The combination of a narrow body air craft and low cost product is an ideal product to target these thinner markets who would get low fares and seamless one stop connectivity. This was actually the rationale behind the EY 9W partnership where Jet was supposed to use its narrow body planes to bring passengers from smaller cities in India. Unfortunately, the cost structure and lack of focus inhibited from realizing this potential. Spicejet would do well to be cognizant of this.

Africa too could be an interesting continent for them to target.

Post the 9w debacle the India outbound market has seen major price escalations. While earlier it would have been difficult for a low cost carrier to sustain a cost advantage, there is an opportunity now given that the air fares have risen 20% on average.

It is also likely that RAK will support this operation heavily and even subsidize it. This will allow SG to offer lower fares and more importantly link city pairs that cannot be serviced by mainstream carriers.

While other carriers such as Jazeera and Air Arabia are pursuing a similar business model, Spicejet's brand recognition and network scale in India would give them a huge advantage in the primary source market. Meanwhile, competitor Indigo has put their European expansion on hold and is instead focused on South East Asia essentially leaving Spicejet's path clear from it's more formidable competitor.

Moreover, this is a very low risk strategy for Spicejet considering it is not investing into a new fleet meaning exit costs will be low if things dont quite work out to plan. Coincidentally Indigo has scrapped plans of serving LGW non stop. It seems both the Indian LCCs have taken note of the painful experiences of other LCCs around the world who forayed into long haul and also wide body operations.
It's good to see them taking a pragmatic view and also avoiding competitive overlaps with each other.

Overall, I can actually see this working. Spicejet can actually stimulate new demand verus competing with large incumbents who will be happy to cede those low yielding segments. That's when low costs have succeeded.

Having said I certainly wont be lining up to buy tickets for a one stop flight to London via RAK on a 737 max

It ties in with the review of the Air Services Bilateral agreement that the UAE govt has been asking for the better part of a decade. India UAE have a unique agreement where there was no UAE-wide agreement but each Emirate (well, 4 of them) had individual agreements with India.

The 4th Emirate being RAK. The downfall of Jet has ironically benefitted consumers (at least in this sector) as all the Indian LCCs have taken their routes/slots and commenced operations at very low prices.

If the new agreement has clauses whereby FlyDXB and Air Arabia largely connect tier 2/3 cities and Indian carriers get more of the prime slots for Tier 1 routes, then combined with the expected Visa on Arrival for Indians, it would be a gamechanger for this sector and for Tourism in UAE in general (previous Visa on arrival waivers for major countries like Russia and China have doubled inflow from those countries).

Rates on this route are dipping below domestic routes within India.

@JB while EK fares to/from India are usually an order of magnitude more than the lowest available price. Often 2x-3x (And this includes comparisons with an Indian FSC - Vistara). Even FlyDXB doesn't exactly compete with the Indian LCCs, since its very much a *regular* airline compared to LCCs

Spice Jet will be the biggest Indian airline flying longhaul to Europe, not to mention the only LCC, both factors giving them the best economies of scale to/from secondary and tertiary markets in India. That matters because on low yield routes customers are likely to prioritize cost above convenience.

By finding a way to operate the route with their existing fleet they’ve made the move incredibly low risk and easy to scale up or down as need be. It can also serve as a test of demand for possible future direct India-Europe services.

There will be a guaranteed minimum level of direct India-Ras Al Khaimah and Ras Al Khaimah-Europe demand, so it won’t take that much connecting traffic to fill a 737.

I’ll admit I don’t have any special knowledge or experience on the topic, but the above combined with the presumably favorable terms they’re getting from the emirate and the vacuum left by Jet Airways mean that to me this seems like a smart move.