Saturday, May 30, 2020

IndiGo, SpiceJet may clock combined Q4 loss of Rs 3,350 cr

New Delhi: As most aircraft stand parked amid the outbreak of coronavirus (Covid-19) pandemic, March quarter of financial year 2019-20 (Q4FY20) could be first among the many loss-making quarters for the aviation sector, fear analysts.

Almost all airlines, including IndiGo and SpiceJet, had drastically cut operations by mid-March, and had begun grounding fleet as net bookings fell into negative — meaning there are more cancellations than fresh bookings on domestic routes. It all came to a complete halt when the government on March 25 imposed a ban on domestic air travel to stem the spread of the virus. This was on top of a ban on international flights which had been in place since March 22.

According to Gagan Dixit, research analyst at Elara Capital, IndiGo and SpiceJet could report a cumulative net loss of Rs 3,350 crore in Q4FY20, as against a profit of Rs 570 crore in Q3FY20 and Rs 650 crore in Q4FY19.

“We expect a YoY yield decrease of IndiGo by 8 per cent and SpiceJet by 10 per cent on lower airfare amid fear of Covid-19 keeping airfares in check, nil fleet addition by SpiceJet and subdued 1 per cent QoQ fleet addition by IndiGo,” he wrote in a sector preview note.

The benefit of crash in crude oil prices in March in likely to be off-set by the depreciation of rupee and slim air traffic movement in the recently concluded quarter.

“While crude prices have slumped 50 per cent in March, the impact of the same would be realised only once operations resume. The interim cut of 11-12 per cent in aviation turbine fuel (ATF) prices effective March 23 will have little impact as operations got suspended from March 25. Further, the rupee has depreciated by 5.8 per cent in Q4FY20E which will increase outgo for US dollar-based costs and also result in steep fx mark-to-market (MTM) losses on operating lease liabilities,” wrote analysts at Centrum Broking in a results preview note.

According to the brokerage, Interglobe Aviation-run IndiGo could report a net loss of Rs 1,750 crore in the quarter under review primarily due to MTM losses worth Rs 1,010 crore. It had reported a net profit of Rs 496 crore in the December quarter of FY20 and Rs 589 crore in Q4FY19.

“We expect IndiGo’s passenger traffic to grow 0.6 per cent YoY to 17.6 million in Q4FY20 due to impacted traffic in March. Load factor, too, will likely decline to 82.5 per cent, down sharply by 350 basis points,” they said.

The analysts, however, expect the airline to end the fiscal year with a 48 per cent domestic market share, having carried 68 million passengers.
29/05/20 Nikita Vashisht/Business Standard

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