SpiceJet's return to profit comes amid legal turbulence

Low-cost airline SpiceJet, which has made a habit of delaying its quarterly results, has finally ended up posting profits of Rs 204.56 crore for the first quarter of the current fiscal on the back of better yields per seat and growing demand for air travel in India.

However, the airline grapples with multiple issues. Stemming from a 2015 dispute, when Ajay Singh reacquired SpiceJet from former owner Kalanithi Maran, the Supreme Court has now directed the airline to pay Maran ₹380 crore. The contention started when Maran and KAL Airways 2017 approached the Delhi High Court seeking a transfer of 180 million warrants convertible into equity shares.

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Separately, the Supreme Court also sent a notice to SpiceJet on a contempt plea by Credit Suisse Group AG regarding due payments. This disagreement originated from a 2011 maintenance contract between SpiceJet and SR Technics. Subsequently, SR Technics entered a financial deal with Credit Suisse, entitled the latter to SpiceJet payments. From the owed $6.5 million, SpiceJet has only cleared slightly over $2 million.

Statistically, SpiceJet's performance has been lacklustre. With the Directorate General of Civil Aviation noting its on-time performance in May at just above 60 per cent, it has not been profitable for four years. Additionally, by May's end, many of its planes were grounded, leading to its market share dropping to 5.4 per cent from 7.3 per cent earlier in the year.

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On the brighter side, Q1 2023 results indicate SpiceJet's relentless recovery effort. The airline posted a profit of ₹204.56 crore from April-June 2023, which is a significant improvement from the ₹788.83 crore loss they had during the same period last year.

However, its revenue (or money earned from selling tickets and services) dropped by 18.5 per cent compared to last year, from ₹2,456.76 crore to ₹2,001.74 crore.

Consolidated vs. Standalone

Considering all parts of the business (consolidated), SpiceJet's profit was ₹197.63 crore, better than last year's ₹783.62 crore loss.

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The revenue fell slightly to ₹2003.6 crore from ₹2,457.18 crore last year. Before considering things like interest, taxes, and depreciation, SpiceJet's profits (EBITDA) were ₹525 crore. Last year, they had a loss of ₹393 crore.

When one accounts for aircraft rent (EBITDAR), the profit was ₹645 crore, compared to a ₹349 crore loss last year. The passenger load factor was 90 per cent on average during this quarter, which is high. The airline earned 26 per cent more for every seat available per kilometre flown (RASK) because it increased ticket prices (yield) by 22 per cent and filled 4 per cent more seats.