Indian budget carrier SpiceJet’s fortunes have begun to turn following a sharp increase in demand for travel. Despite posting a loss of almost ₹8.37 billion ($70 million) in Q2, high fares and more passengers have seen the airline’s finances soar to a net profit of ₹1.1 billion ($13 million) for the quarter ending December 31, 2022.
Swift turn around
Finance has been a fluctuating issue for the low-cost carrier in recent months, with SpiceJet seeking additional capital and debt conversions to mitigate some of its pandemic losses. However, as the aviation industry in Asia makes a dramatic rebound, the low-cost carrier has seen a nearly 160% jump in its consolidated net profits compared to Q3 2021.
The boost appears to be driven by a sharp 33% increase in passenger revenues alongside increasing ticket prices, allowing SpiceJet to offset a slump in its freight and logistics subsidiary, SpiceXpress. Overall, the domestic load factor increased by almost six percentage points to 91% through Q3, the highest in India.
In a statement published by MoneyControl, Chairman and Managing Director Ajay Singh celebrated the carrier’s accomplishments through the quarter,
“We exceeded our operational targets and continued with our unmatched performance clocking the highest load factor for every single month in 2022. The profits have been driven by a strong performance in both our passenger and cargo businesses.”
Shares in Spicejet spiked 12.15% on the Bombay Stock Exchange to ₹39.7 ($0.48) per share on Friday afternoon.
Into Q4 and year-end
While the third quarter was a significant boost for SpiceJet as it bounced back from its previous safety controversies, the airline remains cautious through the remainder of the financial year amid a 48% increase in fuel prices during Q3 and a slowly weakening rupee.
Singh added,
“There are renewed signs of recovery and some positive developments and restructuring initiatives in the immediate offing that would significantly strengthen and deleverage SpiceJet balance sheet.”
Over the past several months, the carrier has sought to slash its debts and find around $200 million in fresh capital to strengthen its operations in the short term. Around $122 is expected to come under the Emergency Credit Line Guarantee Scheme; however, the airline is also looking to convert some debtors into investors and issue securities to qualified institutional buyers.
SpiceJet’s board is set to convene on Monday 27 to discuss converting its outstanding $100 million rental lease with Carlyle Aviation Partners into an equity stake in the airline, according to The Economic Times of India. If approved, the Carlyle Group will receive a roughly 5% stake in SpiceJet and convertible shares for SpiceXpress. The board will also debate over issuing shares on a preferential basis and potential securities, though any decision will require relevant regulatory approval.
Earlier this month, the carrier was ordered by the Supreme Court to pay ex-promoter Kalanithi Maran ₹2.7 billion ($32.5 million) following a nearly eight-year share transfer dispute. The payment is expected by the end of February.
