Q2 Results: What Hurt India’s Two Biggest Airlines In The Second Quarter
IndiGo and SpiceJet (Source: BloombergQuint)

Q2 Results: What Hurt India’s Two Biggest Airlines In The Second Quarter

India’s only two listed airlines posted their highest loss in the quarter ended September as costs rose and the rupee depreciated.

The combined loss of InterGlobe Aviation Ltd. and SpiceJet Ltd. widened to Rs 1,525 crore—the biggest ever—from Rs 1,041 crore a year ago, according to BloombergQuint’s calculations.

Costs of the operator of IndiGo rose because of ageing fleet. For SpiceJet, that was because it leased older aircraft of Jet Airways (India) Ltd. and grounding of Max planes. Also, IndiGo and SpiceJet reported a mark-to-market foreign exchange loss Rs 428 crore and Rs 180 crore, respectively, during the quarter as the rupee depreciated. To be sure, mark-to-market forex losses are not cash loss and just a book entry that could be reversed if rupee strengthens.

For the last two quarters, SpiceJet’s yield—a measure of average fare per passenger per kilometer—were at a premium to IndiGo as the Ajay Singh-led airline focused on routes that faced low competition. But after two years, IndiGo has now been able to catch up with SpiceJet as competition increased on those routes, putting pricing pressure on the nation’s second-largest carrier. While IndiGo’s yield rose 10 percent year-on-year in the quarter ended September, that of SpiceJet remained flat.

SpiceJet, however, pipped India’s largest airline in passenger growth as it added capacity. SpiceJet increased its capacity by 51 percent over last year in the three months through September—the most in 14 quarters. While that helped it fly more passengers and earn more revenue, the additional capacity impacted the airline’s load factor. That’s because the pace of adding capacity was faster than with which the seats were filled. Thus, SpiceJet’s passenger load factor, a measure of capacity utilisation, fell below 90 percent for the first time in 18 quarters.

IndiGo, too, witnessed a decline in its capacity utilisation, but at a slower pace than SpiceJet’s.

Fuel cost, accounting for nearly a third of an airline’s total expenses, declined the most in 13 quarters for both airlines. That’s because crude prices fell during the second quarter. For IndiGo, fuel cost per available seat kilometer declined more than SpiceJet because of its fuel-efficient Neo aircraft and greater operations in international routes.

Airlines cost excluding fuel per available seat kilometer was also the highest ever. IndiGo’s cost excluding fuel increased the most since listing due to an additional maintenance expense of Rs 319 crore and a mark-to-market foreign exchange loss Rs 428 crore.

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