SpiceJet Posts Loss As Indian Aviation Sector Suffers

SpiceJet’s March Q4 quarter profit has risen by 22%, but the airline failed to reach profitability for the financial year overall.

Spice Jet
SpiceJet’s finances have improved, but not enough to turn a profit. Photo: Wikimedia

SpiceJet has been quick to fill into the gap left by Jet Airways after the carrier collapsed several weeks ago, allowing them to have an unusually strong quarter.

What are the details?

Spicejet posted a 22% profit over its figures from March Q4 last year. However, their figures for the financial year 2018-19 show a loss of 316.08 crore ($45m). The airline had reported a profit of 557.20 crore ($79.7m) over the past financial year in.

The reason for this difference is two-fold:

  • The Indian aviation marketplace is still in the throes of a price war, with flights going for as little as $0.02. This is one of the main reasons why airlines like Jet Airways struggled to compete against low-cost carriers.
  • The cost of aviation fuel has risen significantly over the past year, while simultaneously the rupee has fallen, meaning airlines have less capital to use.

Additionally, SpiceJet found their 13 Boeing 737 MAX 8 aircraft grounded after the disaster earlier this year. They had to lease 35 planes during the period to compensate for the grounded aircraft, adding to their overheads.

SpiceJet
SpiceJet has seen increased profits for the last two quarters. Photo: Wikimedia

Ajay Singh, chairman and managing director of SpiceJet, said in a statement to Mint.com:

“SpiceJet has posted a strong recovery in the last two quarters after suffering losses of 427.5 crore in the first two due to steep increase in fuel costs and depreciation of the rupee. This recovery comes despite unprecedented challenges we faced during Q4 FY19 which saw the grounding of as many as 13 of our MAX (Boeing 737 Max) planes,”

Despite this, SpiceJet has been pouring funds into fleet expansion and aggressively moving against competitors. The carrier also signed a memorandum of understanding with Emirates, to help facilitate international travel via interlining and codeshares in the not-so-distant future.

They have also been focusing their efforts into filling the market gap left by Jet Airways.

Video of the day:

Is SpiceJet filling the Jet Airways gap?

Looking at the SpiceJet profit results since Jet Airways grounded its flights, we can see a very clear picture.

  • Profit increased by 22%.
  • Aircraft yields increased by 11%.
  • SpiceJet added another 25 aircraft to their fleet.
  • 106 new flights, mostly between Delhi and Mumbai

“The Q4 results don’t include any compensation (from Boeing for the MAX disaster) and the profits are purely from the operations”

The departure of Jet Airways has been sad, but it hasn’t stopped SpiceJet (and others) from profiting, seizing the Jet Airways aircraft and their lucrative airport landing slots.

Jet Airways Boeing 777-300ER
Jet Airways has left a gap in the market. Photo: Jet Airways

Overall SpiceJet is not worried about the next financial year.

“With a massive fleet expansion this fiscal year, a favourable operating environment, a likely return of the B737 MAX in July, significant improvements in yields and prime slots at key airports, we are confident of a strong performance for FY20,” said the CEO.

What do you think? Will SpiceJet recover from this loss? Let us know in the comments.

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Ng Fook Meng

Yes. They will revover from this loss:
1. Compensation from Boeing from the grounding.
2. Lower cost of fleet expansion in view of Jet’s demise. Lower aircraft lease rentals and staff cost.
3. Less capacity in view of Jet’s demise.
4. Positive economic climate in view of PM Modi being reelected for 2nd term with a clear majority of 60 + seats.
5. Growth in Indian economy.
6. Possible demise of Air India.