SpiceJet, Jet Airways pare losses, but worries loom

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Despite narrower losses, industry experts feel both listed airlines will struggle in the last quarter (SpiceJet) Despite narrower losses, industry experts feel both listed airlines will struggle in the last quarter (SpiceJet)
SummaryDespite narrower losses, industry experts feel both listed airlines will struggle in the last quarter.

Despite reporting better revenues during the third quarter of FY14 due to robust demand from passengers during the peak holiday season, several key factors like rising fuel costs, depreciation of the rupee and increase in airport charges contributed to listed airlines — Jet Airways and SpiceJet — posting losses in the quarter ended December.

While both airlines, Jet Airways and SpiceJet, saw their revenue/topline grow by 7.85% and 12.80% during the latest quarter to Rs 4,535.87 crore and Rs 1,807.74 crore respectively, in line with many analyst estimates, the airlines posted losses during the period as compared to profit during the same quarter of the last fiscal.

However, both the airlines posted narrower losses than ones envisaged by industry experts like Centre for Aviation (CAPA).

Jet Airways posted a loss of Rs 267.89 crore during Q3, FY 2014, from a profit of Rs 85 crore during the same quarter of the previous year while SpiceJet posted a loss of Rs 172.80 crore during the December quarter as against a profit of Rs 102 crore during Q3, FY 2013.

CAPA had earlier estimated that Jet Airways would post a loss of $60- 80 million or Rs 373.20 crore-Rs 497.60 crore during the December quarter. In the case of SpiceJet, CAPA expected the Chennai-headquartered airline to post a loss of $28-35 million or Rs 174.1 crore-Rs 217.7 crore.

Both airlines, however, missed Bloomberg estimates for the bottomline, which pegged Jet Airways to post a loss of about Rs 240 crore and SpiceJet a profit of Rs 172 crore during the December quarter.

“Full year profitability requires carriers to recoup these losses in the first and third quarters. But when the industry is reporting significant losses in peak season it is clear that the domestic Indian aviation market has a fundamental problem with viability,” said a recent CAPA report.

The Competition Commission of India (CCI) had, during November 2013, cleared Abu Dhabi-based Etihad Airway acquiring a 24% stake in Jet Airways for Rs 2,057 crore, making it the first such investment from a foreigns carrier in an Indian airline since the government allowed up to 49% foreign direct investment

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