How Jet Air­ways’ loss fu­elled ri­vals’ gain

March 2019 is a quar­ter to re­mem­ber for In­dia’s avi­a­tion sec­tor

The Hindu Business Line - - FLIGHTPLAN -

The strong re­turn of pric­ing power in the March quar­ter is re­flected in the sharp 12 per cent jump in IndiGo’s yields (av­er­age fares) and 11 per cent in Spice­Jet’s, com­pared with the year-ago pe­riod. This, of course, meant that pas­sen­gers had to pay more, es­pe­cially for tick­ets booked close to travel dates.

Also, there was a healthy jump in pas­sen­ger num­bers for both IndiGo (17 per cent y-o-y) and Spice­Jet (13 per cent) in the March quar­ter, thanks to their own fleet ex­pan­sions, new routes and also shift in traf­fic from Jet. Spice­Jet man­aged to grow its traf­fic de­spite the ground­ing of its Boe­ing 737 Max air­craft due to global safety con­cerns.

Higher ticket prices and higher pas­sen­ger traf­fic saw Indigo’s rev­enue from op­er­a­tions jump 36 per cent y-o-y to ₹7,883 crore, while Spice­Jet saw a 25 per cent jump in rev­enue to ₹2,478 crore. The in­crease in rev­enue was faster than the in­crease in costs

(29 per cent y-o-y in the case of IndiGo and 24 per cent for Spice­Jet).

Com­ment­ing on IndiGo’s Q4 re­sults, SBICAP se­cu­ri­ties says that a strong 12 per cent year-on-year jump in pas­sen­ger yield and eas­ing cost pres­sures helped the air­line defy weak sea­son­al­ity and lift prof­itabil­ity to a record high. Sim­i­larly, SBICAP se­cu­ri­ties feels that the yield uptick more than off­set ris­ing cost pres­sures and helped Spice­Jet record a 22 per cent growth in prof­its.

What also helped IndiGo and Spice­Jet in Q4 were rel­a­tively be­nign fuel costs. As a per­cent­age of sales, fuel costs ac­counted for 33-35 per cent, which is lower than the 36-40 per cent or so in the year-ago pe­riod.

Ac­cord­ing to Ki­ran Kotesh­war,

Spice­Jet’s Chief Fi­nan­cial Of­fi­cer, the air­line does not ex­pect fuel prices to soar

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