SpiceJet Looks To Buy More Planes After Seven Straight Quarters Of Profit

SpiceJet has seen seven consecutive quarters of profit with a growing market share.

A SpiceJet Ltd. aircraft prepares to land at Chhatrapati Shivaji International Airport in Mumbai, India (Photographer: Dhiraj Singh/ Bloomberg)
A SpiceJet Ltd. aircraft prepares to land at Chhatrapati Shivaji International Airport in Mumbai, India (Photographer: Dhiraj Singh/ Bloomberg)

Gurgaon-based airline SpiceJet Ltd., after clearing up its past liabilities is now looking at a period of expansion, and is likely to place an order for a “large” number of aircraft as early as December, chairman and managing director Ajay Singh told BloombergQuint.

While Singh did not disclose the number of aircraft the airline plans to order, he did say that they were in talks with both Boeing and Airbus for narrow-bodied planes. SpiceJet presently does not have a single aircraft from Airbus in its fleet, including the high-selling A320 and A320 Neo models. The company has a fleet comprising only Boeing and Bombardier aircraft.

Singh, who was the founder of SpiceJet, saw media baron Kalanithi Maran acquire controlling stake in the airline in 2010, and subsequently came to its rescue in January 2015 by taking charge once again. Since Singh took over the reigns of the airline, SpiceJet has seen seven consecutive quarters of profit, and has extended its market share to 13 percent from close to 10 percent earlier.

We have done extremely well after the change of management at SpiceJet.
Ajay Singh, Chairman and Managing Director, SpiceJet

Margin Improvement

The airline’s numbers, in terms of passenger load factor and operating margins, have also shown a steady rise over the past months, which was due to its strategy to downsize operations to key focus cities.

For the July-September quarter, SpiceJet reported a net profit of Rs 59 crore, a rise of 103 percent year-on-year, even as its revenues rose 35 percent to Rs 1,400 crore.

The airline had a passenger load factor of 92.3 percent during the period, the highest in the industry.

Another factor that has aided the margins of airlines over the past few months is the subdued price of crude oil. While Singh agreed that lower crude price provided some cushion, he added that cost optimisation in other operational areas contributed more to the airline’s financial numbers. SpiceJet would be comfortable as long as crude prices hover between $45-55 per barrel range, he added.

Travel Industry Hit By Demonetisation

The government’s move to demonetised Rs 500 and Rs 1,000 currency notes, and the subsequent cash crunch has hit the travel industry hard but the effect is likely to be short lived, Singh said.

The bonanza months of December and January were also likely to be impacted by the shortage of cash, he pointed out. December and January are typically are the busiest months for airlines as people plan travels during their Christmas and winter breaks, but this year discounts are being offered even in late November, which is an aberration.