Falling, negative net worth: SpiceJet financials to remain stretched

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New Delhi | Published: November 20, 2018 5:00:45 AM

Low-cost carrier SpiceJet's net worth fell to a negative Rs 461.5 crore at the end of September 2018, according to data available on the company’s website.

spicejet, aviation sector, aviation industryThe net worth as on March 31, 2018 was a negative Rs 42.9 crore.

Low-cost carrier SpiceJet’s net worth fell to a negative Rs 461.5 crore at the end of September 2018, according to data available on the company’s website. The net worth as on March 31, 2018 was a negative Rs 42.9 crore.

According to a report by Crisil dated October 9, 2018, the company’s liquidity will remain stretched due to continued cost pressure “in the near to medium term, driven by significant increase in the operating cost and limited ability to pass on the increased cost to customers due to intense competition. Further, SpiceJet was expecting some cash infusion from the sale and lease back transactions that got delayed due to late delivery of the new aircrafts. Hence, liquidity profile has weakened”.

The agency has downgraded ratings for the airline’s bank loans for the short and well as long term. The airline’s earnings before interest, tax, depreciation, amortisation and rentals (Ebitdar) slipped into the red in the three months to September at a negative Rs 145 crore and it reported a net loss of Rs 389 crore. Borrowings at the end of September were Rs 1,217 crore.

The carrier has maintained a 91% passenger load factor, the highest among the Indian carriers in the 41 months up to August, 2018. While the company had cash and bank balances of Rs 248 crore at the end of March quarter, it has fallen to Rs 109 crore by end of September.

Matters have been worsening for SpiceJet due to a spike in its operating costs and inability to pass it to customers owing to intense competition. This was evident as the firm’s yields dropped 2.5% year-on-year in the three months to September, reflecting virtually no pricing power despite domestic air traffic growing 19% during the period.

Adding to the woes, the delivery of Boeing 737 MAX aircraft has been delayed leading to liquidity imbalance as the company has been expecting gains from sale and leaseback transactions. To tide over the liquidity crunch, the airline has sought a time of three-four months from lessor for payments against leases.

In addition, a rising aviation turbine fuel (ATF) cost and a weakening rupee has proved to be double whammy for the airline. While ATF is 40% of the operating cost of the airline, lease and maintenance are paid in dollar. The cost of ATF went up 10% and rupee depreciated around 8% in the September, 2018 quarter.

Nevertheless, once the aircraft are delivered the airline’s fleet size will go up to 120 from the current 59 which will help it increase its market share which has remained around 12% since June, 2015. SpiceJet’s share in the international market among the domestic players has increased to 8.6% from 6.1% in the same period.

On Monday, the share price of SpiceJet fell 0.96% on the BSE to close at Rs 79.85 apiece on a day benchmark Sensex gained 0.90%. In the last one year, the stock of the airline lost 43.2% under-performing the Sensex which gained 7.3% during the period.

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