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SpiceJet turnaround shows clear skies for carriers

The once-ailing carrier's Q1 net profit more than trebles sequentially to Rs 71 crore as it halve costs and raises load factor up to over 80% through aggressive discounts and schemes

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Budget airline SpiceJet Ltd, which was on the verge of collapse in December last year, has not just survived but made a sharp turnaround reporting a profit for the second consecutive quarter under its new owner Ajay Singh.
On Tuesday, the no-frills carrier announced its June quarter results posting a profit of Rs 71.8 crore compared with a net loss of Rs124.1 crore in the same quarter last year.

The profit has more than trebled over the Rs 21.5 crore it posted in the sequential January-March period, which was its first after seven quarters.

In April-June, it snipped costs by 42% and bumped up its load factor up to over 80% through aggressive discounts and schemes.

Bangalore-based aviation analyst Pankaj Pandit said with the local market growing at a healthy clip over the last couple of months, all airlines are expected to post profits for the June quarter.

"The domestic air passenger growth is averaging 20-24% compared with last year and the load factor is also above 80% for all airlines. Oil prices are also below 2009 level, all these factors are driving airlines towards profits," he said.

According to Pandit, the airline industry can come out of the red soon if it is able to reduce its interest costs that still remain high.

To address this issue, many airlines are looking at raising funds through qualified institutional placement, private equity, initial public offer and other such routes to retire the high interest costs of their debts.

IndiGo, recently, filed a draft red herring prospectus with the Securities and Exchange of India to float an IPO. SpiceJet is also looking to bring in funds through investors for expansion.

Pandit said the financial performance of domestic carriers was now in "sync" with their global peers.

"International airlines have been reporting profits for the last six months, Indian carriers are now in sync with them," he said.

What has helped local carriers is the rapid growth in air passenger numbers and low oil prices without any significant increase in capacity that have helped airlines to meet demand at prices fliers are happy to pay.

"Domestic fares are very competitive and have pushed up the load factors of all airlines. Capacity addition has not gone up significantly compared to demand," he said.

Tata-AirAsia venture AirAsia India and Tata-Singapore Airlines alliance Vistara were supposed to be game-changers in the market, but have till now not able to make much difference as they continued to hold small market share.

Currently, IndiGo and SpiceJet are indulging in market share war. In its bid to corner higher share of air passenger growth, SpiceJet had inducted aircraft on a wet-lease basis in its fleet, pushing up its costs and crimping profit.

The airline's sales from operations in the previous quarter is down 34% to Rs1,106.3 crore from Rs1,691.04 crore in the corresponding quarter last year.

The Gurgaon-based airline broke into profit after seven quarters of losses in the fourth of fiscal 2015, when it registered net profit of Rs 22.1 crore against a loss of Rs 321.51 crore during the same period a year before.

Launches three-day sale

SpiceJet on Tuesday launched a limited-period sale offering fares starting at Rs 999 one-way (taxes and fees not included) for travel on direct flights.

The three-day sale will be open till midnight till July 30 for travel period between August 4 – October 15. Tickets under this offer are non refundable), though changes are allowed for Rs 2,000 plus fare difference, if any.

The routes available at the starting fare of Rs 999 include Bengaluru-Kochi, Delhi-Udaipur, Kolkata-Agartala , Pune-Goa, Amritsar-Srinagar, Hyderabad-Goa, Mumbai-Belgaum, Kolkata-Guwahati, Chennai-Vizag.

More routes are on sale at the next fare brackets. These include Delhi-Jammu and Ahmedabad-Pune for Rs 1,099; Mumbai-Hyderabad and Delhi-Srinagar for Rs 1,299; Bengaluru-Pune and Chennai-Goa for Rs 1,399;

Delhi-Ahmedabad and Mumbai-Bengaluru for Rs 1,499; Mumbai-Chennai and Mumbai-Kochi for Rs 1,899; Mumbai-Delhi and Kolkata-Port Blair for Rs 2,099; Mumbai-Amritsar and Delhi-Guwahati for Rs 2,499; Delhi-Goa and Kolkata-Bengaluru for Rs 2,599 and so on.

 

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