Tuesday, August 22, 2023

Grounded planes, drop in airfares huge challenges for SpiceJet’s in coming quarter

The hat trick in quarterly net profit by low-cost carrier SpiceJet, which has come after a gap of four years, has surprised market watchers as it comes on the back of sliding market share and an unspecified number of grounded airplanes.

The Gurugram-based airline clocked a net profit of Rs 205 crore for the June quarter, which was also the third consecutive quarter of profits for the company. The last time such a hat trick happened was during the three quarters ended June 2019.

The airline promoted by Ajay Singh ferried 20.6 lakh passengers during the June quarter, the lowest in six quarters, as per data shared by the Directorate General of Civil Aviation (DGCA). At just 5.2% in the June quarter, its market share was among the lowest in its history.

“Perhaps the most consistent achievement for SpiceJet is the fact that its load factor was in the north of 90% for each of the months in the June quarter, and that the cost of jet fuel halved,” said a Mumbai-based analyst on the condition of anonymity since brokerages do not file reports on SpiceJet.

The cost of aviation turbine fuel for the airline had slumped 50% year-on-year during the June quarter. While the drop in the fuel cost was in line with the industry trend, its quantum became an outlier as IndiGo recorded a drop of just 13% during the same quarter.  

As per industry estimates, between 25-28 aircraft of SpiceJet out of the total 58, remain grounded, including 10 units of the narrow body Boeing 737s, its flagship aircraft type. With an average age of each aircraft being more than 10 years, SpiceJet’s fleet is amongst the oldest in the Indian aviation space.

Market watchers added that it will be very difficult for SpiceJet to remain in the black in the September quarter. With a reduced fleet, below normal fares due to the on-going lean season and a steep hike of 8.5% in aviation turbine fuel followed by an imposition of duty on the same from August 15, operating margins of SpiceJet will come under pressure.

While the airline posted a loss of Rs 838 crore during the September quarter of last year, the strain on the numbers was visible in the month of July.

22/08/2023 Swaraj Baggonkar/Financial Express

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