Low-cost carrier SpiceJet said on Tuesday that it expects to come back to black in a year after it receives fresh capital.
Low-cost carrier SpiceJet, which has narrowed its net loss in the September quarter on a year-on-year basis, said on Tuesday that it expects to come back to black in a year after it receives fresh capital. The airline, which has accumulated losses of almost R3,000 crore and has a negative net worth of R1,460 crore, is said to be close to clinching an investment deal from an overseas investor, likely from South-east Asia.
The turnaround is slightly delayed because the Kalanithi Maran’s Sun Group-promoted airline has returned a few of its older Boeing 737 aircraft over the past few months due to high maintenance costs. This has resulted in a drop in the scale of operations, because of which the cost savings have had a smaller impact.
COO Sanjiv Kapoor said that a drop in jet fuel prices will help the airline save R320 crore this fiscal (over FY14). But, if the states reduce the VAT on ATF — as has been proposed — and jet fuel prices drop a further 3-4% in December, the savings could be over R600 crore.
“We need to recapitalise given the historic losses, there is no question on that. It will help us get sufficient growth capital and take care of the liabilities. Given our improving operational parameters, I believe many parties are interested in investing in us. There should be no comparison to Kingfisher, because in the last six months they had a passenger load of around 40% and both market share and the product plummeted,” he said.
Compared to July this year, SpiceJet has reduced daily flights by about 40 to 300, largely because its fleet of B737 has come down to 28 (26 are operational) from 35. The airline also has a fleet of 15 Bombardier Q400s turboprops for shorter routes, which it hopes to increase to 25 when it receives fresh funds in order to improve economies of scale for maintenance contracts.
“There are a fair number of flights we are removing from our fleet temporarily as part of the fleet restructuring but should be back to normal by December. We should by back to 35 B737s by December, and 45-50 B737s by second half of 2015,” Kapoor said.
Kapoor further said that on most operational parameters the airline has been doing very well. In Q2FY15 (ending September 30, 2014), SpiceJet saw revenue jump 15% YOY, over double of the 7% capacity increase, even as expenses fell 2%. Load factors were up 19%, while CASK (cost per available seat KM) fell 7%. In the quarter, the airline had reduced net losses by 45% to R310 crore — this included a R75-crore one-off restructuring cost.
The SpiceJet scrip closed up 4.12% at R14.39 on the BSE on Tuesday.