No-frill carrier SpiceJet Ltd on Wednesday reported its first quarterly loss during the current fiscal, on back of higher costs during the seasonally weak quarter.
The losses would have been higher if the airline didn’t make a provision for compensation from Boeing Co. due to the grounding of 737 Max aircraft.
The budget airline—controlled by entrepreneur Ajay Singh—plunged to a consolidated loss of ₹ 461.22 crore in the three months ended 30 September, from a year-earlier net loss of ₹ 382.72 crore.
Expenses rose 54.70% to ₹ 3537.49 croreeven though fuel costs fell by 77% to ₹ 63.25 crore.
The company's latest results include a loss of ₹ 180.3 crore on account of accounting standard IND-AS116, without which the Loss is ₹ 282.3 Crore, SpiceJet said in the results statement.
However, it must be noted that during the last one year, brent crude prices have fallen by 6.16% to $61.44 a barrel while the Indian Rupee has gained 0.81% to ₹72.09 against the US dollar during the same period. Oil prices have declined steadily in the last few weeks.
“With the industry’s growth rate slowing down in the past few months the impact is evident on the bottom line,” SpiceJet Ltd’s chairman and managing director Ajay Singh said in a statement.
“We, however, remain optimistic that the sector will regain the lost momentum as the inherent demand remains very strong,” Singh added.
SpiceJet’s earnings lagged market expectations. A Bloomberg poll of seven analysts forecast the airline to report a loss of ₹328 crore in the September quarter.
Incidentally, InterGlobe Aviation Ltd, which runs India’s largest budget airline IndiGo, also SpiceJet’s listed rival, plunged to a wider-than-expected quarterly loss with higher maintenance and overhaul costs outweighing the increase in passenger traffic.
Last month, IndiGo posted a loss of ₹ 1,062 crore in the September quarter (Q2) compared with a loss of ₹652 crore a year earlier.
Singh said that the continued grounding of 737Max -- with SpiceJet having 13 such grounded planes in its fleet – has adversely affected SpiceJet’s operations and increased costs.
“Nevertheless, we have added 37 planes to our fleet in the past six months to ensure smooth operations and continued growth,” he said adding that the airline expected 737Max planes to return to service early next year.
During the recently concluded September quarter, SpiceJet reported a 61.57% rise in total revenue to ₹ 3,076.27 crore as the airline saw its revenue from operations increase by 49.75% to ₹ 2,761.51 crore.
The airline also made a provision of ₹ 176.71 crore as other income on its balance sheet, as a provision for compensation from Boeing Co. due to the grounding of 737Max aircraft.
“Consequently, and without in any manner limiting or prejudicing the legal and commercial rights of the Group towards its claims in this regard, certain costs (including, inter alia, aircraft and supplemental lease rentals and certain other identified expenses relating to the Boeing 737 Max aircraft) aggregating ₹ 2,908.52 crore -- including ₹ 1,767.12 million ( ₹ 176.71 crore) recorded in the quarter ended September 30, 2019 -- have been recognized as other income during the half-year ended September 30, 2019,” SpiceJet said in the statement.
SpiceJet said that its total capacity (in terms of seat kilometers) were up 51% during the September quarter, while its passenger yields and fares were up 2% and 5% respectively.
The Gurgaon-headquartered airline currently operates about 630 daily flights and has a fleet size of 118 aircraft including 82 Boeing 737, 32 Bombardier Q-400s and four B737 freighters.
Aviation consultant CAPA India’s chief executive Kapil Kaul said that SpiceJet’s September quarter loss is in line with the agency’s estimates, adding that the latest loss could however effect the agency’s full year result estimates on the airline’s financial performance.
“SpiceJet has not been able to fully leverage the induction of Jet Airway’s fleet, as maintenance cost related to these aircraft have been higher than expected,” Kaul added.
CAPA India is expected to release its full year estimates (for FY 2020) about financial and operational performance of Indian airlines, later next week.
On Tuesday, SpiceJet shares fell 1.17% to ₹ 113.30 apiece on the BSE while the benchmark Sensex fell 0.57% to 40,116.06 points. Results were reported after market hours.
