SpiceJet Q3FY20 results

February 14 this year saw SpiceJet report its third-quarter results. The airline reported a profit of 78.2 crore, but the results warrant closer examination. This is because of the Boeing 737 MAX grounding and the fact that compensation that has been recorded, but not yet received by SpiceJet, significantly contributed to this result. Additionally, in looking at the operational numbers, it seems that SpiceJet has not really benefitted from the exit of Jet Airways and the capacity induction. In fact, the expansion has come at a huge cost to the airline. SpiceJet had a revenue increase of 47 per cent against a capacity increase of 59 per cent. Indeed compared to last year, SpiceJet expanded its fleet from 77 aircraft to 119 aircraft. But the telling figure is the cost per available seat per kilometre excluding fuel. This showed a five per cent increase. If calculated as a profit per aircraft, SpiceJet in Q3FY19 made 62 lakh per aircraft compared to 71 lakh per aircraft during the same period last year. Effectively the additional capacity has come with declining profitability.

This is particularly interesting as industry sources indicate that SpiceJet was a key beneficiary of the Ministry’s decision to link slot allocation with new capacity induction post the failure of Jet Airways. Further, fuel costs fell by approximately 14 to 17 per cent during this period. Put simply, SpiceJet flew more with a cheaper input cost, but made less money. The cost of capacity weighed heavily on the airline. Currently, the airline continues to look for capacity. The airline has stated that it will wet-lease two Airbus A320 aircraft. Wet-lease is slowly becoming more accepted in operations and this is the second time that SpiceJet is taking aircraft on wet-lease.