After reporting profit for 13 consecutive quarters, Gurgaon-based SpiceJet reported a loss of Rs 38 crore during the first quarter of the current fiscal on account of provisioning due to an arbitration award.
Rising crude and falling rupee is making survival difficult for Indian carriers, who are reporting decline in numbers. Market leader IndiGo reported a 97% decline in profits and Jet Airways has not announced its first quarter financial results yet.
SpiceJet, however, said that it would have reported a net profit of Rs 25.4 crore, if the airline company did not have to make provision on account of an arbitration award.
“The company has taken a provision of Rs 63.5 crore as an exceptional item on account of an arbitration award that cited interest payable of Rs 92.5 crore and interest receivable of Rs 29 crore for SpiceJet. With this one time provision, SpiceJet has now fully provided for the maximum amount that may be payable under the arbitration award, the airline said in a statement.
An arbitration committee formed by the Delhi High court ruled that the earlier promoter will not get any stake in SpiceJet but the airline will have to pay a refund of Rs 579 crore, plus interest, to the earlier promoter Sun Group.
The airline also accounted for Rs 51 Crore as forex losses (that includes the provision of Rs 25.2 Crore of aforesaid forex revaluation) due to the depreciation of the Indian Rupee, the airline added.
SpiceJet said that the airlines income per Available seat kilometre (ASKM) grew by 6% as compared to same quarter last year due to increase in passenger load factor, and an increase in average fares and ancillary revenues; operating expenses per ASKM increased by 15% on account of 34% increase in ATF and 4% increase in exchange rate.
Income during the quarter increased to Rs 2,270.8 crore for the reported quarter as against Rs 1,886.3 crore in the same quarter in FY2018. For the same comparative period, expenses were Rs 2,245.4 crore as against Rs 1,711 crore.
The company said that it additionally paid an amount of Rs 203 crore on account of increase in cost of Aviation Turbine Fuel and an amount of Rs 44 crore on account of forex losses as compared to Q1 2017.
SpiceJet says that it will be able to offset the impact of rising fuel prices once it starts inducting newer aircraft during the year.
“As we start inducting the new fuel-efficient B737 MAX and the Bombardier Q400, we will be able to significantly reduce our overall costs even as we aggressively expand our network both in India and overseas. We are confident that our operating model is robust to deal with this current unfavorable macro-economic headwinds,” Ajay Singh, Chairman and Managing Director, SpiceJet, was quoted in the release.
The airline is set to induct 15 aircraft till December 2018. These include 11 737 MAX and 4 Bombardier Q400s. The airline said that 737 MAX shall reduce costs by 8 – 9% as compared to the previous generation and the new generation Q400s with additional seating capacity is expected to improve the overall operating economics of this aircraft by 15 – 18%.
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