New Delhi: Low-fare carrier SpiceJet Ltd, in which US-based investor Wilbur Ross infused money last year to keep it in the skies, reported a better-than-expected performance for the fiscal third quarter (Q3), but forecast tough times ahead.
The airline reported a Rs17.90 crore loss for the three months ended 31 December after it settled a court case with S.K. Modi, founder of an earlier avatar of the airline. The loss, also partly driven by exchange rate fluctuations, compared with a profit of Rs9.33 crore in the same period of the previous fiscal year. Sales rose 16% to Rs470 crore.
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SpiceJet spent Rs18.70 crore in the quarter to settle litigation with Modi, the original promoter of the airline once known as ModiLuft. The airline, based in Gurgaon on the outskirts of New Delhi, also lost Rs5.5 crore because of foreign exchange fluctuations.
The performance was better than analysts’ expectations. Aviation consultancy Centre for Asia Pacific Aviation, which had expected SpiceJet to report a loss of Rs60 crore for Q3, said a 24% increase in December yields had helped the airline. SpiceJet’s loss narrowed from Rs198 crore in the three months ended 30 September.
Two other listed airlines, Kingfisher Airlines Ltd and Jet Airways (India) Ltd, have announced net losses of Rs626 crore and Rs236.18 crore, respectively, for the December quarter. Chief executive officer (CEO) Sanjay Aggarwal, who took over in October after SpiceJet received funding from Ross, said the airline’s income had been cushioned by the sale of an aircraft and the leaseback of a plane engine. Setting aside one-time losses, the airline would have made a small profit of Rs80 lakh rather than a loss of Rs17.90 crore, he added. Aggarwal warned that the last quarter of this fiscal year would be tough, with fare yields already down nearly 42% to Rs2,200 per passenger from the Rs3,924 it logged for the December quarter.
“The yields must come up as at the current fares, I know SpiceJet, which has one of the lowest cost structures, needs 100% load factors... It will be hard for us to make money, so you can imagine (what it will be like) for other carriers,” Aggarwal said. Fares need to rise 30-40% for losses to be avoided, he added.
Fares have been dropping as airlines try to get passengers to start flying again. On Monday, SpiceJet offered passengers a return ticket free on select routes, excluding any passenger service fees and user development charges. The offer would be open for two days.
SpiceJet announced the appointment of Ross, chairman and CEO of WL Ross and Co. Llc., and Ranjeet Nabha, managing director and CEO of WL Ross India, on the board of the firm. Ross had infused $80 million (Rs392 crore today) in the airline last year.
Shares of SpiceJet fell 5.29% to close at Rs13.26 on the Bombay Stock Exchange, whose benchmark Sensex index slumped 3.79% on Monday.
Graphics by Sandeep Bhatnagar / Mint
Bloomberg contributed to this story.