No-frills carrier SpiceJet Ltd on Friday reported its highest ever quarterly profit in the June quarter. The profits were driven by other income, including reimbursements from Boeing Co. for the revenue loss due to the grounding of 737 Max aircraft. The increase in yield was also aided by higher passenger traffic following the grounding of Jet Airways, besides expanding its fleet size to cater to more routes and passengers.
The company’s stand-alone net profit rose to ₹261.7 crore in June quarter from a loss of ₹38.1 crore in the corresponding period of the previous fiscal year, the airline said. The result beat the estimates compiled by six brokers polled by Bloomberg who expected it to report ₹137.50 crore in profit.
Stand-alone revenue rose 39.59% to ₹3,145.26 crore during the quarter, beating the estimates of ₹2,991.70 crore by seven brokers polled by Bloomberg.
SpiceJet’s profit in Q1 was aided by other income of ₹143.19 crore, including ₹114.1 crore in reimbursements from Boeing Co. for the revenue loss due to the grounding of 737 Max aircraft. “.... the company has initiated the process of seeking reimbursements from the aircraft manufacturer, of ascertained costs and losses (including opportunity losses) incurred by the company," SpiceJet said.
“Consequently, aircraft and supplemental lease rentals of ₹114.1 crore incurred in the quarter ended 30 June, 2019, relating to Boeing 737 Max aircraft have been recognized as other income during the current quarter," it added.
“The profit reported for this quarter is an operational profit in a true sense as it should not consider the expenses on 737MAX as they are not revenue generating," said Kiran Koteshwar, chief financial officer, SpiceJet
“We added 32 aircraft to our fleet, expanding at a pace unprecedented for a sector plagued by crisis, showcasing our robust business model and proven operational capabilities," said Ajay Singh, SpiceJet’s chairman and managing director, in a statement.
“The results would have been vastly better but for the painful grounding of the Max aircraft," he added. The airline’s total costs, however, increased by 29.43% to ₹2,883.59 crore in the June quarter, with aircraft fuel costs rising by 26.59% to ₹1,028.43 crore during the period. However, oil prices have fallen since the last quarter. According to Bloomberg data, crude price was down by 19.5% to $58.22 a barrel on Friday.
SpiceJet benefited from an aggressive expansion plan following the grounding of cash-strapped Jet Airways in April. The Gurgaon-headquartered airline has obtained several domestic slots at key airports, which were left vacant by Jet Airways. Though, the airline’s fleet of 13 Boeing 737 Max aircraft was grounded in March by the Directorate General of Civil Aviation (DGCA) in line with similar moves across the world, following Ethiopian Airlines and Lion Air plane crashes, SpiceJet managed to lease several Boeing 737 NG places that were earlier operated by Jet Airways. SpiceJet’s fleet of Max airplanes have been grounded since March after the aircraft was grounded by regulators around the world after fatal crashes involving the aircraft operated by Lion Air and Ethiopian Airlines.
“The company had estimated that the grounded Boeing 737 Max aircraft to resume normal operations by July/August 2019 as per the understanding with the aircraft manufacturer," the airline said. “With the current developments and uncertainty around the exact month of resumption, the company plans to cater to the winter season by inducting 5-10 Boeing 737 NG aircraft and 3 Q400 aircraft in October 2019," it added.
On Friday, SpiceJet’s shares rose 1.47% to ₹137.95 on the BSE, outperforming the benchmark Sensex, which rose 0.68% to 37,581.91 points.
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