SpiceJet soars in June quarter
Nobody expected SpiceJet Ltd’s June quarter results to surprise positively. On the contrary, expectations were running low after InterGlobe Aviation Ltd (IndiGo) and Jet Airways (India) Ltd reported weaker-than-expected June quarter financials owing to pricing pressure.
SpiceJet’s shares had declined about 14% till Tuesday since IndiGo announced its results on 1 August. But SpiceJet’s June quarter performance changed the trend. Its share price closed 16% higher on Wednesday.
To be sure, it’s not as if SpiceJet’s fares haven’t declined. They did, by 3% year-on-year. But this decline was smaller than expected. In comparison, IndiGo’s average fare had declined 11%. Further, a combination of 37% increase in capacity, an impressive 92.5% load factor and 64% growth in ancillary revenue helped SpiceJet’s revenue grow 37% to Rs.1,521 crore, according to Kiran Koteshwar, chief financial officer of SpiceJet. Ancillary revenue includes ticket cancellation charges, excess baggage fees, sales of on-board meals, etc.
Of course, the lower fuel cost environment helped. Fuel costs as a percentage of revenues declined to 26% from 32% last year though the measure was higher sequentially. But SpiceJet’s cost per available seat kilometre, or CASK, excluding fuel costs increased 3%. That was on account of the rupee’s depreciation and a general inflationary pressure, said Koteshwar.
Overall operating costs grew at a relatively slower pace than revenues. As a result, operating profit and Ebitdar increased 53% and 57%, respectively, to Rs.192 crore and Rs.451.8 crore. Ebitdar stands for earnings before interest, taxes, depreciation, amortization and lease rentals. SpiceJet’s Ebitdar margin came in at 30%, representing an increase over the June 2015 quarter. In comparison, IndiGo’s Ebitdar margin had declined year-on-year to 33% last quarter.
Flat depreciation costs and a decline in finance costs helped SpiceJet’s net profit more than double to Rs.149 crore. From here on, the outlook really depends on whether the airline can put up such a stellar show on a consistent basis. Domestic passenger growth remains strong. But the current quarter is typically a lean one for the sector and the numbers of aviation companies should reflect that. Despite the recent underperformance, SpiceJet shares have meaningfully outperformed the Sensex in the last one year.