×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

Break-even not before 2009-10 due to high fuel prices: SpiceJet

Break-even not before 2009-10 due to high fuel prices: SpiceJet
Comment E-mail Print Share
First Published: Tue, May 27 2008. 10 50 PM IST
Updated: Wed, May 28 2008. 02 06 PM IST
New Delhi: Low-cost carrier SpiceJet Ltd does not expect to break-even before 2009-10, with soaring jet fuel prices and slowing traffic growth delivering a double whammy, its chief financial officer said on Tuesday.
Partha Sarathi Basu also said the carrier could raise passenger fares if aviation turbine fuel (ATF) prices rose more than 4-5% in a month.
ATF prices, as offered to domestic airlines, rose 56% in a year to May in Mumbai and New Delhi, data from Indian Oil Corp. Ltd showed.
Benchmark Asian jet fuel prices rose 61% to $129.16 (Rs5,541 today) a barrel in the year to March 2008, against a rise of less than 1% in the prior 12 months. With crude prices at record highs, ATF prices are not likely to come down.
“Break-even will not be before 2009-10 due to the fuel prices,” Basu said. “Today 52% of our cost is fuel price. Last year it was only 44%. Our other costs are low and have not gone up.”
Brokerage IL&FS Investsmart Securities Ltd in April had said pressures from fuel costs could stretch the break-even point of most Indian airlines.
SpiceJet plans to hedge its ATF exposure on a recently approved market for such futures in India. “We will be hedging between 25-30% of our requirement, but we are waiting for the appropriate price,” Basu said. Shares of the company have lost more than half their value since 1 January, compared with the broader market, which has lost nearly one-fifth of its value.
The budget carrier expects its sales and passenger traffic to grow between 15% and 17% for the year ending March 2009, slower than its last reported results for 2006-07.
“Generally, airlines grow double that of GDP (gross domestic product). That is the overall trend. If GDP is growing by 8-9%, 15-16% growth is very logical,” Basu said.
Although airlines around the world are bracing for slower growth, tighter earnings and deeper cost-cutting due to surging fuel prices, SpiceJet will continue to add capacity and new destinations.
“We will be adding six aircraft this year, taking our capacity to 24,” Basu said. SpiceJet will also add up to two more destinations to 18 currently in the year ending March 2009.
Basu said the budget carrier will raise funds in the current fiscal year to fund expansion.
“We are looking at $100 million. We are talking to different institutions, private equity players,” Basu said, adding that the decision is likely to be taken by July. Shares of SpiceJet lost 6.9% at Rs33.65 in a Mumbai market, which closed down 0.5%.
Comment E-mail Print Share
First Published: Tue, May 27 2008. 10 50 PM IST