Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Companies / SpiceJet posts profit for second straight quarter
BackBack

SpiceJet posts profit for second straight quarter

SpiceJet posts a net profit of Rs71.84 cr for Q1 ended 30 June compared with a loss of Rs124.10 cr in the year-ago period

SpiceJet, which briefly grounded its fleet on 17 December owing to financial issues, reported a revenue of Rs1,106.30 crore for the reporting quarter against Rs1,678.58 crore in the year earlier. Photo: Aniruddha Chowdhury/MintPremium
SpiceJet, which briefly grounded its fleet on 17 December owing to financial issues, reported a revenue of Rs1,106.30 crore for the reporting quarter against Rs1,678.58 crore in the year earlier. Photo: Aniruddha Chowdhury/Mint

Mumbai: SpiceJet Ltd has reported a second consecutive profitable quarter during April-June period as India’s second largest low-fare airline managed to increase seat occupancy.

The management termed the performance a turnaround for the cash-strapped airline.

SpiceJet reported a net profit of 71.84 crore for the first quarter ended 30 June compared to a loss of 124.10 crore in the year-ago period. The airline had swung to profit in the preceding quarter, after six straight quarters of losses. The airline, which briefly grounded its fleet on 17 December because of financial issues, reported a revenue of 1,106.30 crore for the reporting quarter against 1,678.58 crore in the year earlier.

Analysts polled by Bloomberg had estimated a standalone net loss of 53.60 crore on net sales of 1,012 crore. Aviation consultancy Capa India, however, predicted net profit of 77-90 crore on 1,020-1,090 crore revenue.

The total expenses stood at 1,035.61 crore in the June quarter against 1,782.94 crore, a decline of 42%.

“We are working hard to build a world class airline again. These results show that we are on the right path," said SpiceJet chairman Ajay Singh. “This is the second consecutive profitable quarter, and I am proud of what we have achieved. But there is still a long way to go. I am confident that the best is still ahead of us. We need to strengthen SpiceJet so that it is able to take advantage of the enormous opportunities that will come its way in the coming years," he added.

Earlier this year, after the crisis at the airline in December, Kalanithi Maran, the chairman of Sun TV Network Ltd, had transferred his stake to Singh.

“Indeed, it is a determined comeback from SpiceJet, with a solid 26% EBITDAR margin and strong revenue numbers," said Mahantesh Sabarad, the deputy head of research at SBICap Securities Ltd.

EBITDAR, or earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs, is an indicator of a firm’s financial performance.

Sabarad, however, cautioned that though the airline has the buffer of strong revenues to take care of unforeseen costs, some of the units’ costs are going up on sequential quarters. “One needs to wait and watch how SpiceJet is stabilizing its cost as it builds up its fleet and add network," he said.

Ameya Joshi, an independent aviation analyst, pointed out that while the auditors continue to raise doubt SpiceJet’s ability to continue as going concern since the total liabilities continue to exceed its assets, the results have been splendid.

“However, the results have been commendable and a lot of hard work must have gone into getting the airline to where it stands today. The capacity was down 33%, fuel expenditure was down 54% and that is what has given the airline the maneuvering ability. If the fuel prices go up or the rupee slides in comparison to dollar, these costs would go up, which will make it difficult for the airline to offer the prices, which they are now offering," Joshi said.

According to Sanjiv Kapoor, chief operating officer at SpiceJet, the return to profitability in the last quarter of the previous financial year is an achievement that even hardened naysayers will acknowledge as remarkable.

“With the return of SpiceJet’s co-founder Ajay Singh as our managing director and chairman, we have been able to gain market confidence and address many of the seemingly intractable issues that were holding us back across several dimensions, including, very importantly, on the costs and funding side," Kapoor said.

He pointed out that the airline has made improvements in cash flows and liquidity position, and has been discharging obligations on time. “We are emphatically no longer under financial stress. During this quarter, we have re-inducted an aircraft that had previously been returned and are in discussions to re-induct a few more which reflects renewed lessor confidence in SpiceJet", said Kiran Koteshwar, the chief financial officer of SpiceJet.

“As our performance continues to improve, we will be in a position to gradually pay off historical liabilities as well on terms agreed to with various suppliers, while investing in all of the areas required to secure our future and regain our earlier position in the market," he added.

The airline noted that its profit for the quarter was slightly suppressed due to wet-lease operations, which are by nature more expensive than conventional leases, and by a weaker rupee relative to previous year.

The wet lease includes pilots, cabin crew, maintenance support and an insurance cover, besides the aircraft, unlike a dry lease in which only the plane is leased.

The wet-leased aircraft were taken up to address the short-term capacity shortage and the desire to rebuild the network as quickly as possible. It is expected that these will be replaced by dry-lease aircraft in the coming months. SpiceJet, which uses Boeing Co. planes has started leasing Airbus Group SE jets to increase its capacity. Usually, airlines don’t go for aircraft from various makers as it increases engineering and training costs.

In a statement, SpiceJet said the airline recorded a load factor of 89.8% for April-June quarter, the highest in the industry, an increase of 14.8% over the same period last year.

In line with year-on-year capacity reduction of 33% driven by fleet reductions in late 2014, SpiceJet’s revenue for the quarter was down 34% relative to same period last year. “Costs for the quarter were down 42% relative to same period last year. On a unit basis, revenue per available seat kilometre (RASK) was flat, year-on-year, while cost per available seat kilometre (CASK) was down 13%," it added.

Kapil Kaul, chief executive officer (South Asia), Capa India, said the second quarter of profitability is significant and will further restore market confidence, given its seat occupancy levels.

“Internal confidence has improved significantly. However, operational reliability, especially on-time performance, is below acceptable levels and needs to be urgently addressed. This is hurting customer confidence," said Kaul.

He said funding of $200 million is critical to ensure sustainable turnaround, clearing legacy liabilities, investing in enhancing the operational capability and growth. “However, secure funding may not be realizable in the near term, but continued profitability is key to raising funds. Subject to funding, you will see a new SpiceJet emerging from next fiscal," Kaul said.

Shares of SpiceJet on Tuesday gained 5.77% to close at 26.60 per share on the BSE, while the benchmark Sensex lost 0.37% to close at 27,459.23 points.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
More Less
Published: 28 Jul 2015, 04:23 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App

Chat with MintGenie