Budget carrier SpiceJet Ltd may turn the corner during the quarter ended June 2009 on the back of improving yields and load factors, said an airline official.
This follows a good performance in the quarter ended March, where the budget carrier reduced its net loss from Rs 123.6 crore to Rs 7.8 crore, thanks to 40 per cent reduction in fuel costs and a 4 per cent reduction in unit costs.
SpiceJet registered a 10.3 per cent growth in passenger traffic during the March quarter, even as the overall traffic declined by 13 per cent. The company made a loss of Rs 352.5 crore for the year ended March 2009.
Jet Airways posted a net profit of Rs 53 crore for the quarter ended March 31, thanks to lower fuel prices and rationalisation of capacity. Jet had suffered a loss of Rs 221.2 crore in the same quarter of the previous financial year.
What could help SpiceJet turn around in the current quarter is an improvement in yields by 10-15 per cent in the past couple of months, when on an average it was able to sell 70-80 per cent of seats on its flights. It achieved a plane load factor of 75-76 per cent in April, and improved it to 80-81 per cent in May and is likely to end June with a load factor of 76-77 per cent. Yields have improved from Rs 2,700 to Rs 3,100 in the past few months.
‘‘Q2 will be a real turnaround, as we were able to maintain our base and the load factors,’’ said a senior SpiceJet official. But investors and shareholders will have to wait till July-end, when the airline announces the result for the June quarter.
The drop in fuel prices has been a key factor helping airlines to curb losses. SpiceJet has also been trying to cut flab and rationalise capacity; it plans to cut capacity from metro routes and deploy them in tier II and tier III routes.
CEO Sanjay Aggarwal is also trying to increase the aircraft utilisation to 11.7 hours a day (an aircraft is an expensive asset; the more it can fly in a day, the better it is for the airline, of course, with good loads and yields).
Spicejet is also hedging its fuel costs, which has gone up to 20 per cent of its fuel requirement for Q3 and Q4 this fiscal, from 10 per cent in the first two quarters. It doesn’t mind if it makes a hedging loss, which was Rs 23.7 crore last fiscal. ‘‘Our fuel costs is X. If we can protect our fuel costs, even if there’s a hedging loss, let’s go for it,’’ Aggarwal told BS. He came on board after distressed asset investor Wilbur Ross infused Rs 345 crore (around $80 million) in July 2008.
Spicejet’s recovery could be dented if oil prices go up again. More than that, Jet Airways and Kingfisher could spoil the party for budget carriers as they deploy more capacities in no-frills offerings, Jet Airways Konnect and Kingfisher Red.
On Wednesday, Jet added two more Boeng 737s for Jet Airways Konnect, which now flies on both non-metro and metro routes.
‘‘Jet Airways and Kingfisher Airlines are trying to disrupt existing budget carriers by getting into a price war. The impact of this could be seen on airline yields and loads really in July and August, in the lean season,’’ said an airline executive.
