It’s turnaround time for Airlines

Early last year, when the economy was still in a downturn, it appeared that airlines wouldn’t be out of the red in a hurry. But the Delhi-based low-cost carrier, SpiceJet, has managed a smart turnaround in the December 2009 quarter, posting a net profit of Rs 109 crore. That’s way better than the losses, in the September 2009 quarter, of Rs 101 crore.

It’s true that the improving economic environment has resulted in an upswing in passenger traffic-airlines in India collectively carried 445.13 lakh passengers in 2009 against 412.71 lakh passengers in 2008, up 8%. SpiceJet’s planes are now fuller than they were at this time last year-load factors in December 2009 were far higher at 88%, compared with loads of 70%in December 2008.

And it has managed to grow market share. From 7% at the end of March 2009, the carrier now commands a share just under 13%. It’s possible that some of the gain has come at the cost of GoAir whose share has dropped by 80 basis points to 4.5% from 5.3% in March last year.

What’s also helped is the better utilisation of its aircraft. SpiceJet has been able to increase the number of flights per day per aircraft from 5.3 last year to 6.4 in the first half of the current year. Says Sanjay Agarwal, CEO, Spicejet, “We have increased the number of flights daily from around 101 in 2008-09 to 122 currently by making better use of our existing fleet of 19 aircraft.” By using its assets better, the airline has managed to improve its financial performance.

Not surprisingly, SpiceJet’s revenues in the December quarter were up 36%, at Rs 642 crore. More important,, it has been helped by lower fuel costs, which were down 19%, at Rs 888 crore. This has helped the airline post a positive EBITDAR (earnings before interest, tax, depreciation, amortisation and rentals) margin of 31% in the December 2009 quarter.

The carrier hasn’t really played around with its route map and continues to operate daily flights on the metro routes of Mumbai-Delhi and Mumbai-Bangalore, which are the busiest in the country. Says Aggarwal, “We do not have any immediate plans to grow the network or curtail any routes and continue to operate to 18 destinations.”

Currently, the airline operates 125 flights daily and has logged an on-time performance of 75.5% during December 2009, compared with archrival Indigo’s performance of 73%.

Source: Financial Express