While the June quarter was expected to be a shortfall for airlines, rising freight revenues gave SpiceJet Ltd some relief in these turbulent times. Cargo revenue more than doubled for the low-fare airline and increased 144% year-over-year for ₹236 crore.
However, that did not move the needle on the profitability front, as total operating revenue fell 83% year over year to ₹514 crore. The loss at the level of Ebitdar was ₹166.5 crore. Ebitdar is earnings before interest, taxes, depreciation and rent; a key measure of profitability for airlines. For the perspective: in the absence of covid-19 last year, for the same period, SpiceJet had obtained a positive Ebitdar of ₹684 crore.
Granted, the fuel costs were lower, but it only helped to a point when load factors dropped sharply. Non-fuel costs are a pain when the scale of operations has dropped significantly due to pandemic disruption. In the June quarter, non-fuel unit costs increased by 530% ₹17.2 even as unit revenue increased 118%.
Overall, SpiceJet reported a loss of ₹593 crore for the three months ended June. In recent quarters, the airline has recognized compensation from Boeing for its 13 737 Max planes on the ground. The June quarter was no different with other income including ₹140 crore relating to Boeing compensation. As such, the outstanding claims amount to approximately ₹810 crore so far.
“We will keep a close eye on the terms of payment and the actual flow of compensation,” wrote Paarth Gala, analyst at Prabhudas Lilladher Pvt. Ltd, in a September 16 report.
Gala added: “While the limited scale of operations remains insufficient to cover all costs, which puts additional pressure on finances, SpiceJet continues to explore new revenue streams such as increased cargo operations. and charter operations (including large-scale long-haul charters). “
Even so, the rise in coronavirus cases increases uncertainty over whether passenger traffic growth will resume to levels seen before the pandemic. Experts say demand would take some time to fully recover. Obviously, this would weigh on the aviation sector.
The tough trading conditions are reflected in the erosion of SpiceJet’s stock value by more than 50% from its pre-covid highs in January. After the June quarter results, SpiceJet stock was trading flat in the early hours of trading on Wednesday.
SpiceJet’s record is delicate and it is a major risk for investors. By the end of fiscal 20, SpiceJet’s negative net worth had grown to ₹1,580 crore from ₹847 crore at the end of September 2019. In addition, at the end of FY20, the consolidated cash and bank balance fell by more than half in six months to a mere ₹42 crore, and his rental obligations exploded.