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Budget carrier SpiceJet, which has been steadily improving operating performance over the past three quarters, said on Tuesday that it would return to profitability within a year of receiving a fresh infusion of funds.
According to chief operating officer Sanjiv Kapoor, SpiceJet is close to sealing a deal with investors. The carrier has accumulated losses of Rs 3,000 crore and has a negative net worth of Rs 1,460 crore.
“We need to re-capitalise, given the historic losses. 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 its last six months it had passenger load around 40 per cent and both market share and the product plummeted,” said Kapoor.
SpiceJet has returned some of its older Boeing 737 aircraft over the past few months, owing to high maintenance costs. This has resulted in a drop in the scale of operations. Compared to July this year, SpiceJet has reduced daily flights by 40-45 to 300 flights.
Kapoor said, “We’re removing a fair number of flights from our fleet temporarily as part of fleet restructuring, but we should be back to normal by December. There is a short-term impact. Twenty-six out of 28 aircraft in our fleet are operational today. This (fleet size) should go up to 31 by the end of the month and to 35 aircraft by December-end.” Once fresh funds come in, the Boeing 737 fleet will see 10-15 additions, most likely by the end of 2015.
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.
The airline further said a drop in jet fuel prices will help the airline save Rs 320 crore in FY15 over FY14. Kapoor said: “Globally, ATF (aviation turbine fuel) price has come down by 20 per cent. Only half of this has been passed on to airlines in India. If jet fuel prices come down by another three or four per cent and also state governments reduce ATF taxes, then there could be substantial savings.”
Kapoor further said on most operational parameters, the airline has been doing quite well. In the second quarter ended September 30, 2014, SpiceJet saw its revenue swell 15 per cent year-on-year, way ahead of its passenger-carrying capacity increase of seven per cent, even as expenses fell two per cent. Load factors were up 19 per cent, while CASK (cost per available seat kilometre) fell seven per cent. In the quarter, the airline had reduced net losses by 45 per cent to Rs 310 crore – this included a Rs 75 crore one-off restructuring cost.
SpiceJet's auditor SR Batliboi & Associates has also consistently raised doubts about the airline’s ability to continue as a going concern, highlighting the need to attract an investor. SpiceJet has delayed payments to various parties, including vendors and statuary authorities.
Shares of SpiceJet were trading at Rs 14.39 apiece on the BSE on Tuesday, up 4.12 per cent from the previous close.
