How Jet Airways’ loss fuelled rivals’ gain
March 2019 is a quarter to remember for India’s aviation sector
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