SpiceJet highlighted how improving economic indicators has led to reversal in trends of domestic passenger traffic, and hoped momentum will sustain.
SpiceJet believes that recovery will favour low cost carriers (LCCs), which has already seen increase in share to ~30% share (up from 20% a year ago). Also, carriers such as SpiceJet have already returned to profitability due to relatively lower cost/ASKs, thanks to more seats/aircraft and lower distribution expenses.
Last year, sector pruned aircraft capacity by ~3%, but traffic contracted sharper at 11%. Industry (including SpiceJet) believe that legacy carriers (mainly Kingfisher) will continue to cut capacity over medium term, whereas improving demand trends will likely bring equilibrium to demand-supply mismatch by next year.
SpiceJet registered Rs 1.2bn /$25mn EBITDAR in Q1 FY10 during early stages of recovery. Following Wilbur Ross’ investment through the convertible route with no restrictive covenants, the company has access to $80mn of additional resources.
SpiceJet is expected to report a net loss of 617 cr in FY 2010 and net profit of Rs 300 cr in FY 2011.