SpiceJet posts record loss; sees overseas routes cutting costs

By Devidutta Tripathy

NEW DELHI (Reuters) - Airline SpiceJet Ltd reported a record quarterly loss on Thursday, hit by high fuel prices and weaker rupee but said it expected its international expansion would help cut costs.

SpiceJet and rivals such as Jet Airways operate in a country where provincial taxes make jet fuel among the world's most expensive. They also have to contend with a rupee trading near a record low, raising costs which are mostly denominated in dollars.

India's fourth-biggest airline by domestic market share and controlled by billionaire Kalanithi Maran's Sun Group, added two more international routes last quarter, taking the total to 10.

 

"While these initiatives add to the pressure on margins due to the start-up costs involved in setting up a new station, the contributions from overseas flying will help in reducing costs through a better utilisation of the fleet," SpiceJet said in a statement.

The company's net loss widened to 5.59 billion rupees for its fiscal second quarter ended September 30, which compared with a net loss of 1.64 billion rupees in the same period last year. Revenue from operations rose 6 percent, while passenger numbers were up 9 percent.

India was the 10th-largest civil aviation market last year accounting for 2.5 percent of passenger traffic, according to a recent report by industry body ASSOCHAM and Yes Bank . However market penetration is just 0.04 air trips per head of population a year, compared with 2.0 in the United States and Australia.

The government expects passenger traffic to triple during the current decade as incomes rise, a prospect which has persuaded foreign carriers such as Singapore Airlines Ltd and AirAsia Bhd to set up airlines in Asia's third-largest economy. Meanwhile Abu Dhabi's Etihad Airways is buying a stake in Jet Airways for $330 million.

SpiceJet is widely seen as the next likely target for foreign investment after the government last year began allowing foreign airlines to buy as much as 49 percent of a local carrier. SpiceJet has said it has received some interest from potential investors but has not named any.

AILING AIRLINES

Market leader IndiGo apart, all four of India's other airlines are money-losing. Kingfisher Airlines , once India's second-biggest carrier, has not flown in a year for want of cash and has had little success so far in its bid to revive operations.

SpiceJet's auditor said in the company's annual report as of end-March that the company's ability to remain a "going concern" depended on establishing profitable operations and raising funds.

SpiceJet has been without a chief executive since announcing Neil Mills' resignation in early August but the company recently appointed Sanjiv Kapoor, a former Northwest Airlines and Temasek executive, as its chief operating officer.

Last month Jet Airways, the only other listed Indian carrier that is operational, also reported a record quarterly loss for the three months ended September 30.

Shares in SpiceJet, valued at about $170 million, closed 1 percent down at 19.90 rupees before the results were announced, while the local market index was down 0.5 percent. (Additional reporting by Reshma Apte in Bangalore; Editing by Elaine Hardcastle, Greg Mahlich)