UPDATE – Delhi-based low-cost airline SpiceJet has reported a net profit of Rs 2.05 billion for the quarter ending June 2023. This is an increase of 126 percent as compared to a net loss of Rs-7.890 billion in Q1 FY2023. The airline said that the results were owing to the strong demand for air travel in India.
SpiceJet is the second listed airline company to report a net profit. Earlier this month, Delhi-based IndiGo, which is also a listed company with a domestic market share of over 60 percent, declared its highest-ever quarterly earnings of Rs 171.609 billion and its highest-ever quarterly net profit of Rs 30.906 billion during the first quarter of the fiscal year 2023-24. Incidentally, the airline reported a net loss of Rs 10.64 billion in the previous equivalent quarter.
SpiceJet said that for the same comparative period, operating expenses were Rs 12.91 billion as against Rs 2.07 billion, while total operating revenue for the reported quarter was Rs 20.02 billion as against Rs 24.57 billion in the same quarter of the previous year.
The airline said it lowered net loss to Rs 15.03 billion in FY2023 compared to Rs 17.25 billion in FY2022, while for the same comparative period, SpiceJet reported operating revenue of Rs 88.69 billion in FY2023 as against Rs 65.57 billion in FY 2022.
Hiving off the logistics platform
SpiceJet completed the hive-off of its logistics platform into a separate entity, SpiceXpress and Logistics Private Limited effective April 1. Consequent to the hive-off there is an improvement of net worth in SpiceJet to the tune of Rs 25.57 billion (from negative Rs-42.28 billion to negative Rs-32.32 billion which is a positive variance of 25 percent), the airline said in a statement.
“I am happy that despite facing multiple challenges, we have posted a profit in Q1 FY2024. I firmly believe in the potential of our airline, and I am pleased to have contributed to its growth by infusing Rs 5 billion into the Company. This infusion will help bolster our efforts in reviving our grounded planes, for which we have been working tirelessly, strengthening our fleet and expanding our cargo operations,” the statement quoted Mr Ajay Singh, Chairman and Managing Director, SpiceJet, as saying.
Singh, who pumped fresh capital into the airline in July, added that the logistics arm continues to soar. “Its exceptional performance, with sustained profits, has been a driving force, contributing to our overall success. We remain focused on adapting to the changing landscape of the aviation industry, identifying and seizing new opportunities, and steering our airline towards greater heights.”
In the recent past, the airline has faced multiple challenges including being put under enhanced surveillance by the Directorate General of Civil Aviation, something that the airline denied. The enhanced surveillance has now been removed.
In July, the National Company Law Tribunal (NCLT) postponed the hearing of insolvency pleas against budget carrier SpiceJet, granting the airline ten days to file a rejoinder. The pleas were filed by aircraft lessors Aircastle of Ireland and Wilmington Trust. The court was scheduled to hear the Aircastle case on 8 August, and Wilmington Trust’s plea on August 17.
Commenting on the latest results, Satyendra Pandey, Managing Partner, Aviation advisory firm, AT-TV felt that while the results are open to interpretation, the cash position of the airline remains challenging, and the balance sheet remains weak. “There are ongoing legal challenges including Section 9 applications (which at times can trigger the insolvency process) and there is also the issue of the court judgment with regards to the earlier promoters where the airline has been asked to pay a significant sum of money.” Pandey said.
He adds that on the financials, the auditors have given a qualified opinion and there are numerous adjustments to the financial statements pointing out that for the foreseeable future, SpiceJet will have to continually engage with suppliers and stakeholders and find a negotiated settlement for past dues.
“SpiceJet continues to sit on a large Boeing order however, aircraft have not been inducted. This too at a time when the market demand is soaring. Equity remains the need of the hour and the cash position of the airline requires action sooner rather than later.” Pandey says.
Singh summoned to appear in the Supreme Court
The results came on the day that India’s top court, the Supreme Court, asked Ajay Singh to appear before the court and respond to a contempt case by Credit Suisse over unpaid dues, a lawyer involved in the case told Reuters. Credit Suisse in March approached the top court seeking to initiate contempt proceedings against Singh and SpiceJet over “a wilful and intentional disobedience” of court orders and failure to pay dues of several million dollars as per a settlement between the two sides, a court filing shows.
SpiceJet in a statement said that the “debt, it should be noted, is an old one and predates the current Promoter taking over the company.” The airline statement added that a settlement agreement had been reached between SpiceJet and Credit Suisse last year for an amount of $24 million.
“The payment of the settlement amount was subject to Reserve Bank of India (RBI) approval. SpiceJet could not start the payment as per the applicable schedule under the consent terms for a few months till RBI approval came. Till date, SpiceJet has paid a total of $7.1 million to Credit Suisse. The shortfall of $4.4 million pertains to the period when RBI approval was still awaited. The Company intends to pay this ($4.4 million) and the remaining balance amount as per the applicable schedule” the statement adds.