Here’s How Airlines Beat Higher Fuel Costs
IndiGo and SpicJet outperform Jet Airways in Q3.
Passenger growth, a stronger rupee and a rise in average fares more than offset higher fuel prices for two of the top three airlines in India.
InterGlobe Aviation Ltd., the parent of IndiGo, and SpiceJet Ltd. reported better numbers in the third quarter ended December. Jet Airways Ltd. was hurt by its international business.
The revenue per available seat kilometre increased for all the three listed carriers, with Indigo leading the table and SpiceJet saw an uptick. That’s on the back of strong passenger growth and higher average fare. Jet Airways’ RASK remained muted.
The average fare earned rose for Indigo and SpiceJet. Their average ticket price increased in the last three straight quarters. For Jet Airways, the average fare earned fell because of its weak international business.
The total cost per available seat kilometre increased for the three carriers as aviation turbine fuel prices rose about 13 percent year-on-year to Rs 56,450 per kilolitre.
Jet Airways beat its competitors in cost per available seat kilometre excluding fuel. That fell for the fifth straight quarter largely owing to cost cuts.
The core profit of the airlines—revenue minus cost per available seat kilometre—improved for all the three airlines. Yet, it remained negative for Jet Airways.
The airlines expect to maintain the momentum on domestic demand and a benign fuel price outlook. The government’s bid to boost regional connectivity through UDAN, which offers private airlines subsidy to fly to smaller cities, and a transition towards fuel-efficient air planes is also expected to boost earnings.