SpiceJet, reported its second quarter results of the fiscal year 2018-19 (FY19) and much like the results of other listed airlines, it recorded loss for the quarter. SpiceJet had a revenue increase of four per cent against a capacity increase of six per cent. The RASK and load factor numbers indicate that while they are selling aggressively, the market yields continue to be suppressed. This is an industry-level challenge and the second quarter was particularly weak due to the dearth of holiday weekends and festivals which usually help with demand uptick. Luckily, fares have picked up for the third quarter though not enough to cover the rise in costs. SpiceJet also benefits by having regional routes which have limited competition thus yield declines are also limited. However as a note of caution, the travel base for several regional routes is low. Thus as costs rise, the airline may not be able to raise fare in the same proportion as travellers will move to other modes of travel, mainly road and rail.
The second quarter fiscal 2018 performance was weak across all airlines and SpiceJet was no exception. While SpiceJet’s turnaround story continues to amaze and inspire, the structural environment may not allow for continued success. With competition all around and capacity addition like there is no tomorrow, the future may be the most challenging SpiceJet has ever faced. Q3 and Q4 will indicate how this competition plays out.
