NEW DELHI : SpiceJet Ltd showed an unexpected net profit in the December quarter after reporting a huge loss in the previous three months, and analysts said this was because the company took into account a compensation offered by Boeing Co.

India’s second-largest budget airline by market share reported a consolidated net profit of 77.97 crore in the December quarter, an increase of 21% from the 64.44 crore in the year-ago period. It reported loss of 461 crore in the September quarter.

A Bloomberg survey of eight analysts expected the carrier to incur a profit of 57.63 crore in Q3.

The growth in net profit was, however, based on ‘other income’, or an ‘interim offer’ from Boeing Co. to compensate SpiceJet for the costs incurred for the grounding of 13 737MAX aircraft. According to SpiceJet’s estimates, the expense for the grounding of the planes during the nine-month period to December 2019 was 537.27 crore, including 246.42 crore for Q3.

If the airline had not recognized such other income, it would have reported losses of 173.19 crore for the December quarter. Boeing is yet to release the compensation amount.

Auditors S.R. Batliboi and Associates LLP said in a statement on BSE website, “In our view, there is no virtual certainty to recognise such other income, as required by paragraph 33 of Ind-AS 37. Had the company not recognised such other income, the reported profit for the quarter and loss for the year to date from 1 April 2019 to 31 December 2019 would have been a loss of 1,731.95 million ( 173.20 crore) and a loss of 6,649.56 million ( 664.96 crore), respectively, and accumulated losses as at 31 December 2019 would have been higher by 5,372.70 million ( 537.27 crore)."

The airline’s expenses increased by about 56% from the year ago to 3,848.61 crore in Q3. Fuel costs were, however, down from 343.17 crore in Q3 FY19 to 102.46 crore in the December quarter.

“Despite the challenges that the airline is facing in terms of additional costs incurred, compounded by the continued grounding of its Boeing 737 MAX aircraft, the airline’s capacity has grown by 59% in 2019," SpiceJet said in a statement. “The average domestic load factor for the quarter was 91.9%," it added.

The airline’s consolidated total revenue grew 55% to 3,926.58 crore in Q3, from 2,532.61 crore a year ago. The figure crossed the 3,201.2 crore consensus analysts’ estimate by Bloomberg.

“Despite a rise in costs, the airline reported a healthy profit as it was able to increase its revenue. The costs went up despite lower fuel prices, as the airline has been steadily inducting capacity," said a Mumbai-based analyst who tracks the sector closely.

“However, both SpiceJet’s and (rival) IndiGo’s December quarter results show the pricing pressure that existed during the previous quarters has tapered out," he added.

India’s largest domestic carrier IndiGo (InterGlobe Aviation Ltd) reported a twofold increase in net profit in Q3 to 496 crore.

SpiceJet said it has added six aircraft to its fleet. At the end of the quarter it had 119 planes, comprising 82 Boeing 737s, 32 Bombardier Q 400s and five B737 freighters.

“SpiceJet has done remarkably well this quarter, despite a substantial profit hit from the grounding of the (Boeing 737 MAX) MAX aircraft, which has impacted our operations and led to additional costs," SpiceJet’s chairman and managing director Ajay Singh said in a statement.

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