Thursday, January 24, 2013

SpiceJet's new engines of growth

SpiceJet has every reason to rejoice. Its strategy of funneling traffic from smaller cities ignored by other airlines to regional hubs and flying to uncharted routes abroad like Kabul, Guangzhou and Male is reaping rich rewards. The airline, now owned by Kalanithi Maran, posted net profit of Rs102 crore for the quarter ended December 2012. In the same quarter of the previous year, it had reported a loss of Rs39 crore. Its yield per passenger has risen around Rs1,000, or 29 per cent, in last one year. To put it in perspective: the airline had posted a loss of Rs600 crore in 2011-12 on the 12 million tickets it had sold; that translates to a loss of Rs 500 on each ticket.
In spite of the handsome profits in the last quarter, SpiceJet’s problems are far from over. In the first nine months of 2013-14, it is still in the red: its loss stood at Rs5.36 crore. That it needs to wipe out in the current quarter. But it happens to be the lean season, when leisure travel takes the backseat. The airline’s performance has wavered from a bountiful first quarter (profit of Rs 56 crore) to a disastrous second quarter (loss of Rs 163 crore), and now a brilliant third quarter.
With February and March traditionally being the lean season, when people fly much less, the airline is relying on heavy discounts to spur sales. A few days ago, it had put up for sale 1 million tickets on a heavily-discounted price of Rs 2,013 (all inclusive) apiece. The window was kept open for 72 hours.
24/01/13 Surajeet Das Gupta/Business Standard