For industry observers, the airline’s results are a surprise regarding the reported profit. SpiceJet results report profits are up 161%, while operational revenues are up 2%. The airline reported a net profit of Rs 232.8 million, excluding a foreign exchange adjustment of Rs 200 million for the quarter that ended December 31, 2021. SpiceXpress, the airline’s cargo division, reported a net profit of Rs 120 million and revenues of Rs 1,200 million, during the quarter that ended in December 2022.

In comparison, IndiGo, another Delhi-based low-cost airline, reported a net profit of Rs 14.2 billion for the quarter that ended 31, 2022, as compared to a profit of Rs 1.29 billion during the same quarter previously. For the quarter that ended December 2022, IndiGo reported a profit of Rs 20.09 billion, excluding foreign exchange loss. Including a foreign exchange loss of Rs 5.86 billion, the net profit for the quarter stood at Rs 14.22 billion.

IndiGo has more than a 50 percent market share, while SpiceJet has a domestic market share of about 10 percent.  SpiceJet claims that despite a huge rise in passenger numbers during the quarter that ended in December 2022, the business was impacted by high fuel prices and the depreciation of the Indian Rupee. The airline claimed that there had been an average increase in ATF prices by 48 percent as compared to the same quarter previously. The airline suffered on account of an about 11 percent depreciation in the Indian Rupee, mainly against the Dollar.

For the latest quarter, SpiceJet reported total revenue of Rs 27,940 million against Rs 26,790 million in the same quarter of the previous year. Operating expenses were recorded at Rs 26,870 million during the latest quarter as against Rs 25,790 million previously.

Commenting on the results, Ajay Singh, Chairman, and Managing Director, of SpiceJet, said that the profits had been driven by a strong performance in both passenger and cargo businesses. “There are renewed signs of recovery and some very positive developments and restructuring initiatives in the immediate offing that would significantly strengthen and deleverage our balance sheet,” he said. Domestic air travel in India is returning to pre-Covid levels, with airlines carrying over 400,000 passengers daily. In January this year, Indian carriers flew 12.5 million passengers, with SpiceJet carrying over .9 million passengers.

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“Interestingly, this has been generated at a time when a sizeable portion of its fleet has not been flying. Looking at the reported numbers, the 33 percent revenue growth outpaced the 8 percent growth in expenses. This is both a reflection of the market dynamics and some routes where SpiceJet enjoys a monopoly,” an industry source who declined to be identified said.

Balance sheet remains weak

Another industry source, who also declined to be identified, said that the profit notwithstanding, SpiceJet’s balance sheet issues remain. “By the airline’s own admission, it has accessed approximately Rs 2,100 million of the Central government’s Emergency Credit Line Guarantee Scheme’s (ECLGS) funds and expects another Rs 1,280 million odd. By their very nature, these funds point to a situation of emergency and one where credit is urgently required and where banks are not quite willing to lend without guarantees (in this case, government guarantees). Thus, this has to be incorporated into the analysis of the results.”

In October last year, the Central government modified the ECLGS to give the domestic civil aviation sector necessary collateral-free liquidity at reasonable interest rates to tide over their cash flow problems.

Industry sources noted that auditors had given several qualified opinions on SpiceJet’s results. Similarly, numbers relating to the fleet, including how many aircraft are flying, have not been included.  India’s air travel market is roaring back, after a few Covid-bumps, and  DGCA data suggests that SpiceJet has lost some market share.  The results may not be as good as reported.

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Ashwini Phadnis

Former Senior Deputy Editor at Business Line (aka The Hindu Business Line)