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SpiceJet takes Rs 275 crore hit in December quarter on one-off expenses

Debt ridden low-cost carrier (LCC) SpiceJet on Thursday reported a much higher loss of Rs 275 crore in the quarter ended December 31, 2014, mainly on the back of one-off expenditure like unproductive lease rentals, provisions for reduction in fleet size and early contract terminations. In the corresponding quarter of the last fiscal, the budget carrier had posted losses of Rs 172 crore. The steep loss reported by the company during the quarter is in a sharp contrast to the return of profitability, albeit marginally, registered by competitors such as Jet Airways and Air India, taking advantage of a sharp fall in aviation turbine fuel or ATF rates.

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Debt ridden low-cost carrier (LCC) SpiceJet on Thursday reported a much higher loss of Rs 275 crore in the quarter ended December 31, 2014, mainly on the back of one-off expenditure like unproductive lease rentals, provisions for reduction in fleet size and early contract terminations. In the corresponding quarter of the last fiscal, the budget carrier had posted losses of Rs 172 crore. The steep loss reported by the company during the quarter is in a sharp contrast to the return of profitability, albeit marginally, registered by competitors such as Jet Airways and Air India, taking advantage of a sharp fall in aviation turbine fuel or ATF rates.

The company management claimed that, had there been no such one-time write-offs, the company would have achieved net profit of Rs 20 crore for the quarter.

Commenting on the results, Sanjiv Kapoor, SpiceJet's chief operating officer said, "The last quarter was an extremely challenging quarter for SpiceJet as legacy issues, accumulated losses, and delays in expected and required re-capitalisation eventually led to aircraft fleet reductions and consequential cancellations of flights in what is traditionally one of the best quarters of the year".

Cash-strapped SpiceJet, which had been in the eye of a storm over its worsening financial health, gained some lease of life last month after its original promoter Ajay Singh offered to bail it out in a multi-layered deal worth up to Rs 1,500 crore.

In the past, the struggling airline reduced its fleet size and cancelled flights, leading to a loss in its image and goodwill. Hundreds of its employees, including pilots, had to shift to other airlines. As per the reported deal, Maran family agreed to cede control of the airline with the transfer of over 53% stake. The airline management at present is making a desperate attempt to make a turn-around and is taking competition head-on by offering fares at heavy discounts.

"The impact of aircraft fleet reductions negatively impacted both revenues and costs, as we had to combine flights to handle cancellations which severely limited available inventory to sell at high yields during peak season, while having to incur distress costs and absorb fixed costs and overheads over a much lower capacity (ASK) base."

"Further, in order to quantify and account for liabilities related to early terminations of contracts, we have provisioned for costs related to those terminations where deemed necessary", said Kiran Koteshwar, chief financial officer, SpiceJet.

The airline officials said that despite the fleet reduction-related challenges, the company achieved a 5% higher unit revenue on a year-on-year basis.

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