Aviation: Smooth landing
The September quarter is typically leaner for Indian aviation firms because it is a non-holiday and non-festive season. However, some support from better fares and some relief on fuel costs sequentially were expected to have a positive influence.
The numbers reflect that to a good extent. InterGlobe Aviation Ltd’s (the company that runs IndiGo airline) results surprised positively. Yields were better and increased 9% year-on-year (y-o-y), beating Street expectations. For perspective: Motilal Oswal Securities Ltd and SBICAP Securities Ltd were expecting the measure to improve by 2.3% and 2%, respectively. Better revenue management helped IndiGo’s yield performance.
Yield is the passenger ticket revenue per revenue passenger kilometre.
Ebitdar, an important measure of profitability for airlines, jumped 61% over a year ago to Rs1,557 crore, way ahead of Street estimates. Ebitdar is short for earnings before interest, taxes, depreciation, amortization and rentals. Profits also got a boost owing to a quarter-on-quarter decline in fuel costs; the cost was 6% higher y-o-y. Further, IndiGo also received credits from Pratt and Whitney and Airbus related to aircraft grounding and delivery delays, which helped overall performance.
On the other hand, SpiceJet Ltd’s net profit missed estimates. Even so, net profit of Rs105 crore, amounting to nearly 80% y-o-y growth, is not bad at all. A combination of factors such as robust revenue growth, strong other income growth and decline in finance costs boosted net profitability. SpiceJet’s 30% y-o-y revenue growth was on the back of a 23% volume growth and a 6% increase in pricing, pointed out SBICAP Securities. Ebitdar increased by one-fourth to Rs397 crore.
Till now, this fiscal year, shares of SpiceJet have outperformed the S&P BSE Sensex, while those of IndiGo have performed broadly in line with the benchmark. What next? “As IndiGo commences its regional operations and migrates in part to the aircraft ownership model, we expect more clarity on the impact of these factors on the cost structure,” said analysts at SBICAP Securities in a report on 31 October. For SpiceJet, progress under the regional connectivity UDAN scheme will be worth watching.