Q4 profits aided by Q400 – Spicejet turboprops to profits

What started as a year to remember soon turned out to be a year to forget for Spicejet. The last financial year is not a year which one should use as a benchmark for analysis, but the same was probably said a year before that aswell.

This could be last real chance of survival and with Ajay Singh at helm and the management team led by Sanjiv Kapoor still pushing towards the turnaround – the airline looks set to complete the task it set out doing almost two years ago.  How and when it will repay the debt and recover from these losses will have to be answered soon, else it will become other Jet airways which have lately seen good operational results but the older debt on the balance sheet is pulling the overall performance downwards.

Spicejet reported an annual loss of INR 687.05 Cr for the year ending 31st March 2015, an improvement of INR 316 Cr over the previous year when it reported record losses of INR 1003 Cr. The airline reported a net profit of INR 22.5 Cr for the last quarter of FY15.

The airline did not declare the critical parameters like CASK, RASK, ASK – which they had in Q1 and Q2.

Turboprop to the rescue

On 8th of March, 2015 VT-SUA, a Bombardier Q400 operating from Bengaluru to Hubli at SG1085 veered off the runway on landing in rains at Hubli. The aircraft was considered a write off since it was beyond repair. The airline earned INR 61.35 Cr from insurance agencies after considering its book value and paying off relevant charges.

It is on the back of this income which is listed under extraordinary items in the balance sheet that the airline is back in profit after seven quarters of losses.

Interestingly this very fleet of Bombardier Q400s made a lot of news last year before and after the takeover by Ajay Singh. Apparently the new owner was not happy with the Q400 fleet as he believes in single fleet strategy. The fleet has a new lease of life for next few months when operations and benefits are to be reviewed before a final decision is taken.

The airline now has a fleet of 14 Q400s based in North (Delhi) and South (Hyderabad & Chennai)


With new management firmly in place, new initiatives led by flash sales were being projected as a way of filling up aircraft; however it was equally true that they were also aimed at getting cash for operations.

What was under doubt became evident in November and December of 2014, so much so that operations came to a grinding halt, after redelivery of many B737 aircraft. The phase it went through – Fleet revamp, new menu, SpiceMax has turned a full circle as many of these re-configured aircraft were re-delivered at a cost. To tide over the crisis, it has now taken three aircraft on damp lease.

Eventually Ajay Singh – a minority owner and initial promoter of the airline came to the rescue and bought it back from the Marans – who exited at a loss.

Result Summary

Even while the turnaround looks in sight and the airline is upbeat about the same, the auditors continue to raise doubts about the company’s ability to continue as a “Going concern”.

The airline had an operational loss of INR 102.5 Cr for Q4 while the operational loss stood at INR 784.85 Cr for the financial year.

The airline had to redeliver 14 B737 series aircraft, a mix of B737-800 and B737-900 owing to its financial distress on which the company spent INR 318.46 Cr in the last financial year. This includes early lease termination penalties.

These relatively stronger numbers are on the back of lower expenditure on account of lower fuel charges and lesser aircraft from the previous quarter.

  • Net profit of INR 22.5 Cr in Q4-FY15 on the back of one time exceptional gain
  • Operating loss of INR 102.5 Cr in Q4-FY15
  • Net loss of INR 687.05 Cr in FY15
  • Operating loss of INR 784.85 Cr in FY15
  • 18% lower revenue on a YoY basis
  • 40% lower income from operations on QoQ basis
  • 17% lower income from operations on YoY basis
  • Earnings Per Share has turned positive in Q4-FY15
  • Noticeable betterment of Earnings Per Share on annual basis

What Next?

Unbundling of services will help shore up ancillary revenues for the airline. However, if not priced properly there is a risk of losing passengers to FSC. With additional capacity over last quarter, the airline will do good in terms of loads and market share, however it will need even more capacity to hold on to business traffic in lean months at least on the metro routes.

Air Asia starting operations from Delhi – which has been a Spicejet hub could pose minor challenges for Spicejet since most of the routes started by Air Asia and also by Vistara are those where Spicejet already operates. It is at such times that the Q400 offering will be the differentiator.

It will take another two quarters for finances to improve and a realistic financial assessment is and turnaround should be seen in Q3-F16 which also happens to be the peak season.

While the airline continues to see record loads, the On Time Performance continues to be an area of concern.


  • Re-negotiated contracts with Bombardier and other vendors for the Q400 will yield good results
  • Worldwide lessors will offer more B737s to the airline
  • Drop in Fuel Prices
  • Competition will stay away from strong SpiceJet routes
  • Loads are already high; OTP would go up too with sustained efforts which will help attract corporate clients
  • Unbundling of services


  • Passenger memory about cancellations
  • Currently last in OTP
  • Competition from new players in South on Q400 routes and from Air Asia and Vistara ex-Delhi on B737 routes



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