SpiceJet returns to profit on better fares, net at Rs 102 crore

Written by fe Bureau | New Delhi | Updated: Jan 22 2013, 07:38am hrs
Kalanithi Maran-owned low-cost carrier SpiceJet swung back to profit during the October-December quarter with a net profit of Rs 102 crore, mainly due to an improvement in airfares coupled with an increase in market share. In the same quarter last year, the airline had posted a loss of R39 crore.

This is the second time the carrier has managed to post a quarterly profit during this fiscal, the previous time being in the first quarter of fiscal 2012-13. For the quarter, SpiceJets net sales increased 37% to R1,577.79 crore from R1,152.42 crore in the same quarter last year.

To announce a profit of R102 crore for the third quarter in a current challenging environment is a huge achievement and clearly demonstrates that the strategic changes SpiceJet made in the last two years has created a platform for future success of the company, Neil Mills, chief executive officer, said in a statement. The airline posted a loss of R164 crore in the second quarter of fiscal 2012-13. But a 29% improvement in average passenger yields to R4,412 from R3,421 helped the airline return to profits. An increase in yields indicates an improvement in airfares.

Apart from the improved airfares, SpiceJet also gained from the grounding of Kingfisher Airlines. The Vijay Mallya-owned airline did not operate a single flight during the quarter, which helped increase SpiceJets market share to 19.20% in December 2012 from 16.80% in December 2011.

Better airfares also helped offset a drop in average passenger load factors. During the quarter, SpiceJet had load factors of 75% compared with 80% in the same quarter last year.

The Chennai-based budget carrier also said that better fleet utilisation and an altered route mix due to more international flights helped reduce fuel cost as proportion of the total revenue.

The fuel cost as a proportion of total revenue fell to 45% in the current quarter while it was 50% in the same quarter last year. Year-on-year fuel costs rose 21% to R718.34 crore from R592.30 crore in the same quarter last year.

Notwithstanding this improvement, which certainly augurs well for the aviation sector, the fact remains that the Indian airline industry continues to bear the brunt of extremely high incidence of taxation, said the airline in a statement. A weighted average tax rate of 24% on ATF prices across various stations in India is among the highest in the world and constitutes the biggest hurdle for domestic carriers in their quest for long term profitable growth.

On Monday, SpiceJets share closed up 5.01% on the Bombay Stock Exchange at R46.15.