SpiceJet reported a loss of $80.4 million for the second quarter of 2020, which saw passenger flights grounded for two months. Revenue fell by 83%, with airlines relying heavily on cargo to make up for nascent passenger numbers. While still a sharp loss, SpiceJet beat expectations for a greater losses in what has been India’s worst aviation quarter yet.
Tough quarter but better-than-expected results
The second quarter of 2020 will go down in history as the worst quarter for Indian carriers. Passenger flights were banned on March 25th and only resumed on May 25th, after two full months. With two months of passenger revenue lost, airlines saw major losses and switched to cargo flights instead.
SpiceJet reported a loss of $80.4 million (₹593 crores) for the second quarter, from April to June this year. Revenues plummeted 83% to $65.5 million (₹483 crores) for the quarter due to the lack of passenger flights. This quarter stands in stark contrast to the same time last year when SpiceJet reported record profits.
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While the losses are steep, SpiceJet actually beat expectations. The airline reported bigger losses of $108 million in Q1 which means it has brought down costs substantially. Estimates expected a 40% greater loss for this quarter, with SpiceJet beating those back. So how did SpiceJet manage to exceed expectations in one the worst quarter yet? The answer is cargo.
Cargo revenues soar
SpiceJet saw it’s cargo revenue soar this quarter, rising a colossal 144%. The airline has flown 7,000 cargo since the lockdown, carrying 50,000 tonnes of cargo. With passenger planes out of the sky, cargo capacity dropped drastically, allowing SpiceJet to fill in the gap.
The airline operates a fleet of eight freight aircraft, including five 737 BCFs (Boeing Converted Freighters) and one wet-leased Hi Fly A340.
As India’s only passenger airline with a dedicated cargo fleet, SpiceJet has seen it’s cargo business do extremely well this year. A large share of global cargo was previously carried in the belly of passenger flights. With those mostly grounded, cargo rates have quickly increased, boosting freight airlines. Airlines around the world have benefitted from this shortage of capacity, with some even turning a profit.
While SpiceJet might have managed to narrow losses this quarter, concerns over its future continue to linger. The airline has been rapidly expanding its operations in the last few months, with plans for long-haul flights. It recently wet-leased a converted A340 freighter and A330neo from Hi Fly, hoping to start long-haul operations soon.
Despite these plans, Bloomberg recently noted that SpiceJet is “among the most likely to go bankrupt in the world without any fresh infusion of funds.” The airline’s auditors also said losses could be much more if SpiceJet did not include other incomes, such as the yet-to-arrive 737 MAX compensation from Boeing.
The next quarter will likely be better for SpiceJet since 47% of its passenger flights back in the air, possibly allying some of these concerns.
What do you make of SpiceJet’s results? Let us know in the comments!