SpiceJet's loss rises in Q4

Despite discounts, net loss increases to Rs 321 cr; budget airline in discussions to raise $100 mn

SpiceJet’s net loss widened to Rs 321 crore in the fourth quarter ended March from Rs 186 crore in the corresponding period last prior year on expensive jet fuel, a falling rupee and slow passenger growth.  

This is third successive quarterly loss for the airline, taking the total to Rs 1,003 crore in 2013-14.

The airline is in discussion with foreign investors and financial institutions for raising capital. The management refused to share details but sources said the SpiceJet could raise as much as $100 million (Rs 600 crore). Fundraising has become essential as accumulated losses have eroded the budget airline’s net worth.

Over the last three months, the Sun Group-owned airline launched a series of marketing initiatives, including discount offers, made changes to its network and was working on improving its offering. However, these initiatives have not resulted in passenger growth. The airline on Saturday said the number of passengers it flew in the fourth quarter of 2013-14 declined six per cent from the same period a year ago despite a 2 per cent increase in departures and a 5 per cent rise in capacity.

Data by the Directorate General of Civil Aviation also shows airlines, including SpiceJet, were unable to increase occupancy despite discounts. The fourth quarter is usually a weak one for air travel in India.

SpiceJet’s revenue in the quarter grew eight per cent to Rs 1,589 crore and passenger yield improved 17 per cent to Rs 4,735 but these could not contain the losses. In expenses, fuel, lease rent and airport charges increased while maintenance costs declined.

A SpiceJet release said 2013-14 was the most challenging period in India's aviation history.

“The sharp depreciation of the rupee during the quarter ended September 30, 2013, was unprecedented. Given the fact that over 75 per cent of any Indian airline’s cost is influenced by the dollar, the effects of exchange rates on a broad spectrum of cost heads were crippling,” it added.

The airline, however, said its year-on-year unit revenue  rose despite the adverse conditions. The airline’s revenue per available seat km in the three months ended March 31, 2014, was five per cent higher but unit cost rose 12 per cent from the same period a year ago.

The discounts, however, did help SpiceJet gain market share in March against February, despite a two per cent year-on-year cut in capacity in the former month. SpiceJet expects the macroeconomic environment to improve and demand to grow in 2014-15.

SpiceJet’s full-year loss was in line with consultancy firm Centre for Asia Pacific Aviation (CAPA)’s estimate of a Rs 1,000 crore loss. Kapil Kaul, CAPA’s chief executive for South Asia, said the airline needed to raise at least $200 million (Rs 1,200 crore) to stabilise operations.

“Recent efforts to improve service delivery will make a decisive impact only when the turnaround is fully funded. We see some correction in the airline's pricing strategy, especially related to bookings closer to travel, which is a step in right direction, and I hope sensible revenue management will continue in future as well,” he added.