The September quarter typically tends to be a lean one for the aviation sector. In that scenario, of the three listed aviation firms, SpiceJet Ltd managed to perform relatively better on some key parameters.
Its average fare per passenger rose 5% in the September quarter on a year-on-year basis. That compares favourably with InterGlobe Aviation Ltd, which runs IndiGo airline, and Jet Airways (India) Ltd, both of which reported a drop in fares.
SpiceJet’s revenue grew robustly by 35% while IndiGo saw an about 18% revenue growth. Lower yields (pricing) set off the benefits from higher volumes to an extent for IndiGo.
Its Ebitdar rose at a further slower pace of 11% and Ebitdar margin declined 140 basis points to 23.2%. SpiceJet’s Ebitdar rose 68% while Ebitdar margin expanded 456 basis points.
One basis point is one-hundredth of a percentage point.
Ebitdar is short for earnings before interest, taxes, depreciation, amortization and rentals (aircraft and engine rentals) and is a measure of profitability for airlines.
Jet Airways’s stand-alone revenue growth was the slowest at 3%. Its Ebitdar declined 1.5% and Ebitdar margin declined by 75 basis points.
In a Jet Airways’s post results report, analysts at ICICI Direct said macro factors for aviation like passenger traffic growth (up over 23% year-on-year) benign aviation turbine fuel (ATF) prices (24% of revenue) continue to remain healthy. However, “growing competition and limited capacity addition by the company would limit the margin expansion and net profitability, going forward,” they added.
Some analysts expect fares to normalize in the current quarter, helped by the festival season. Needless to say, if that does not pan out, it may have an adverse impact on performance. Demonetisation is another factor to watch out for in the coming days. Increase in crude oil prices will be a concern considering lower prices played a major role in boosting profitability of airlines in general.
High passenger load factor should give SpiceJet some flexibility in pricing action, if required, in the event of a sharp increase in crude price, Rohan Korde of Prabhudas Lilladher Pvt. Ltd wrote in a report on 28 November.
So far this fiscal till 2 December, the share prices of SpiceJet, IndiGo and Jet Airways have declined by 1.5%, 3.2% and 31%, respectively. The BSE Sensex has risen 3.5% during the same period.