Fourth Successive Profitable Quarter Helps SpiceJet

While the stock prices of SpiceJet, the second largest low-cost airline, went up by 13.5 per cent in the early trade on January 25 as it posted its highest-ever net profit in the December quarter - Rs 238 crore on sales of Rs 1,460 crore - led by surge in passenger traffic and lower fuel cost, there was a massive 19 per cent fall in the share price of InterGlobe Aviation (IndiGo Airlines) on January 22 despite having posted a 24 per cent jump in its third-quarter profit - Rs 657.28 crore by December 31, 2015 as compared to Rs 531.56 crore in the year-ago period. IndiGo is the largest domestic carrier by market share and the most profitable among the half-dozen Indian carriers.

A dent in 'expectations' and 'perception' seems to have pulled down the share prices of IndiGo apart from two other factors: A surprise dip in Q2 profit (July-September 2015) and higher expenses on account of leasing planes. Analysts have also pointed to the delay in deliveries of Neo aircraft from Airbus and lack of volume and margin guidance from the airline as possible reasons for the sharp decline in its stock prices. The delay from Airbus will mean that IndiGo cannot ramp up its capacity to 134 aircrafts from 111 aircrafts currently as announced earlier. So based on higher expectations (which were not met post result announcement) and positive perception (that turned slightly negative post announcement) IndiGo's stock prices suffered the brunt.

"Our business continues to perform well on the back of increase in fleet size, robust passenger demand and low fuel prices. Lower fuel prices enabled us to lower our fares to our customers, further stimulating market demand and increasing the propensity of people to travel," Aditya Ghosh, president and whole-time director, said. The December quarter is the peak season for airlines because of travel during festivals and year-end holidays. IndiGo witnessed over 27 per cent growth in its passenger traffic in the third quarter compared to year-ago same period. However, the average fare for the December quarter slipped by 14 per cent compared to the same period last year.

However, SpiceJet posting a fourth consecutive profitable quarter since its turnaround in December 2014 coupled with posting the highest load factor of 91.6 per cent (capacity utilization) has helped the share prices as the results seems to have surpassed the expectations.

As of 10.12 a.m., SpiceJet shares traded 8 per cent higher at Rs. 76.70, outperforming the broad market indicator, Sensex that was up 0.80 per cent. IndiGo traded 4 per cent lower at Rs. 931. Total revenue of SpiceJet went up 11 per cent to Rs 1,460 crore against Rs 1,311 crore in the same period last year. On earnings before interest, tax, depreciation and amortization (EBITDA) basis, SpiceJet reported a profit of Rs 292 crore against a loss of Rs 195 crore in the same quarter last year, the company said in a release. The fuel cost per available seat kilometer (ASKM) for the quarter has declined to 1.07 from 1.59 last year, a decline of 33 per cent.

"SpiceJet was back to near normal operations this quarter. While the margins remain slightly depressed due to wet lease operations, the Chennai floods and exchange losses, we are happy with the progress we have made so far," said Ajay Singh, Chairman and Managing Director, SpiceJet. "The company will continue to work on reducing legacy cost and increasing efficiency," he added.

The remaining BSE-listed carrier - Jet Airways - is scheduled to post its third quarter results on February 06th. The last two quarters have been good for Jet and now it remains to be seen whether its results match up to the 'expectations' and 'perception' built by market expects and analysts around its financial health.