Shares of SpiceJet Ltd are up 11% so far post the announcement of December quarter (Q3FY23) results. Robust demand meant the airline swung to profits after three quarters. It reported net profit of ₹107 crore versus a loss of ₹838 crore in the September quarter.
SpiceJet’s yield, which is a measure of pricing, grew by 17% year-on-year to Rs5.2. This is roughly in line with its peer, IndiGo, which saw a yield of Rs5.37 in Q3. Further, SpiceJet’s passenger load factor at 91% was the highest in the industry. This measure for IndiGo stood at 85%.
SpiceJet faced headwinds in the form of elevated fuel prices and depreciating rupee. But given the strong yield, it reported Ebitdar (earnings before interest, tax, depreciation, amortization and rent) of Rs591 crore versus loss of Rs387 crore in the September quarter.
Going ahead, the volatility of aviation turbine fuel prices needs closer monitoring.
“The addition of the 737-8 MAX aircrafts will likely help buttress growth – higher capacity (220 seats versus 180 in 737 next generation) and better fuel efficiency (~20% more efficient),” said analysts at Nuvama Research in a report on 24 February.
To be sure, lack of information from SpiceJet with respect to other key operational data such as cost per available seat kilometre is concerning. Also, the cargo business’ performance is not encouraging. The segment saw 37% sequential decline in loads in Q3.
It does not help that the airline’s balance sheet continues to remain weak and this is a sore point of investors. After accounting for the rally in share prices, the SpiceJet stock is down by almost 37% from its 52-week high of Rs62.30 seen in April.
“Given the lack of transparency for investors, transfer of the cargo business, replacement of cheap Boeing planes, inability to raise funds and weak balance sheet, we cut FY23E/24E Ebitdar by 6%/ 9%,” said analysts at Nuvama Research in a report on 24 February.
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