New Delhi/ Mumbai: The country’s three listed airline companies, Jet Airways (India) Ltd, SpiceJet Ltd and Deccan Aviation Ltd, could report operating profits for the December quarter compared with losses in the year-ago period, helped by strong passenger growth and imposition of addition fuel surcharge, according to analysts tracking the aviation sector in India.
The last quarter of the year is generally the peak season for airlines across India. This year, the carriers were able to hike airfares by Rs400-500 on an average, resulting in higher yields and consequently better revenues, apart from Rs300 extra per ticket as fuel surcharge.
A leading foreign brokerage pointed out that Jet Airways will post a net loss of over Rs100 crore as there was no sale and leaseback deal during the reporting quarter and there Jet Airways’ margin had been under pressure because of international operations.
Nose up: Strong seat occupancy levels and better fares are expected to help Jet Airways to break even in the third quarter. (Photo: Asesh Shah/Mint)
“But the airline is expected to post break-even for its both business units, domestic and international. This is mainly due to strong seat occupancy levels and better fares during the quarter,” an analyst with that firm said.
According to Prabhudas Lilladher (Pvt.) Ltd, low-fare airline SpiceJet is expected to post a net profit of Rs3 crore thanks to income from sale and leaseback of planes.
The airline is expected to have made a profit of Rs6 crore by selling a Boeing 737-800 and a Boeing 737-900 ER aircraft to US firm Babcock and Brown Ltd, according a person close to the transaction. Without this financial income, Prabhudas Lilladher said, SpiceJet, which reports results on Tuesday, would have made an operating loss of Rs34.90 crore.
“This would be the best quarter for SpiceJet and perhaps a profitable one at both operating level as well as at the net level,” said Siddhartha Khemka, an analyst with ICICI Direct, estimating that total passenger revenue for the airline could be Rs380 crore for the quarter apart from another 6% ancillary revenues compared with the last quarter revenue of about Rs270 crore (Rs222.6 crore plus Rs47.37 crore from other income).
Higher fares than in the previous year as also a higher fuel surcharge moving to Rs1,650 a ticket in December from Rs1,350 in November will help the airline. Overall, Khemka said he expected the airline to report a loss of Rs6 crore for the entire fiscal year from a loss of Rs70.74 crore in the previous year.
Bangalore-based Deccan Aviation too may be able to report reduced losses, estimates Sidharth Agrawal, an analyst with IL&FS Investsmart Ltd. Deccan may do so largely due to route optimization and cost savings by sharing resources with UB Group-owned Kingfisher Airlines Ltd, with which it is merging, with expected estimated annual savings of Rs150 crore and nearly Rs12 crore each month since July.
“We believe that increase in revenues by about Rs280 crore (on account of rise in yields) and synergy benefits with Kingfisher of Rs150 crore would support the company in reducing its accumulated losses,” Agarwal said in December note. “To put things in perspective, the company reported losses of Rs420 crore in fiscal 2007 (June-end) and Rs250 crore in the first quarter of fiscal 2008; this saving of Rs430 crore is expected to effect a turnaround,” he said.
Subodh Gupta, an aviation analyst at NM Rothschild India Pvt. Ltd, said the results looked predictable in the year ahead. In calendar 2008, he expects that with a “moderate” addition in capacity and fewer airlines in the market, confidence in the aviation industry could bounce back by the second half of this year or early 2009 depending on factors such as stock market movement and crude oil prices.