SpiceJet reports a profit of ₹261.7 crore

India’s second-largest airline SpiceJet reported ₹261.7 crore in profit in the June quarter as compared to a loss of ₹38.1 crore in the same period a year ago.

While the budget airline’s passenger revenues grew by 34% in the April to June period, its highest-ever quarterly profit came on the back of it having recognised expenses of ₹114.1 crore, which is related to aircraft and supplemental lease rentals, as other income.

The airline’s total income for the quarter grew by 40% to ₹3,145.3 crore compared to ₹2,253.3 crore reported in the year-ago period. In comparison, IndiGo, India’s largest airline, reported a profit of ₹1,203.10 crore on revenues of ₹9,420.10 crore, in the June quarter.

While SpiceJet’s fleet of 13 Boeing 737 MAX aircraft has remained grounded since March this year, following the worldwide grounding of the said aircraft, the airline continues to incur various costs for its grounded fleet.

"As a result of the above, and the uncertainty in timing of return to operations of these aircraft, the company has initiated the process of seeking reimbursements from the aircraft manufacturer, of ascertained costs and losses (including opportunity losses) incurred by the company,” SpiceJet said in its quarterly earnings report to the bourses, on Friday.

“While the company continues to work with the aircraft manufacturer to address the above, based on its assessment and legal advice obtained by the company, management is confident of a favourable outcome with regard to these reimbursements. Consequently, aircraft and supplemental lease rentals of ₹114.1 crore incurred in the quarter ended June 30, 2019 relating to Boeing 737 MAX aircraft have been recognised as other income during the current quarter,” the airline said.

“The results would have been vastly better but for the painful grounding of the MAX aircraft. We look forward to their swift return to service in the near future that will help SpiceJet increase its margins and provide a superior level of service,” said Ajay Singh, chairman and managing director, SpiceJet.

That said, the airline has been on a capacity addition spree during the quarter, inducting 27 of Boeing’s older generation 737 NG aircraft into its fleet — a majority of them being aircraft that were earlier leased to the erstwhile Jet Airways.

“SpiceJet has been on a spectacular growth journey and this quarter, in particular, has been very special for us. We [overall] added 32 aircraft to our fleet expanding at a pace unprecedented for a sector plagued by crisis, showcasing our robust business model and proven operational capabilities,” said Singh.

With these aircraft inductions, the airline was able to launch 130 additional flights that include 78 flights connecting to Mumbai, 20 connecting to Delhi, and 12 connecting Mumbai and Delhi. Overall, its capacity — in terms of seat kilometers — was up by 31%.

Further, effective April 1, 2019, the airline said it has adopted “the new accounting standard IND AS 116 which effectively capitalises operating [aircraft] leases, and as result of this the lease rentals are now reflected as interest and depreciation for the quarter ending June 2019.”

The airline also said, “owing to the retrospective treatment of this standard there is a reduction of ₹302.2 crore from retained earnings status as at April 1, 2019.”

The airline’s share price was up by 1.54% at ₹138.20 apiece, in afternoon trade on Friday.