SpiceJet posts surprise profit, lifts Indian airline stocks

NEW DELHI Mon Jul 30, 2012 4:40pm IST

A SpiceJet Boeing 737-800 aircraft is parked on the tarmac at Rajiv Gandhi International Airport in Hyderabad March 7, 2012. REUTERS/Vivek Prakash/Files

A SpiceJet Boeing 737-800 aircraft is parked on the tarmac at Rajiv Gandhi International Airport in Hyderabad March 7, 2012.

Credit: Reuters/Vivek Prakash/Files

Stocks

   

NEW DELHI (Reuters) - SpiceJet Ltd (SPJT.BO), India's second-biggest budget airline, posted an unexpected quarterly profit on Monday that raised hopes of a turnaround in the country's embattled aviation industry, sending airline stocks sharply higher.

Indian carriers, reeling under debt of $20 billion, lost a combined $2 billion last year on high fuel and airport charges and below-cost fares. All but IndiGo, India's top low-fare airline, lost money.

"Coming after five consecutive quarters of losses and making a fairly healthy profit in this quarter shows a turnaround for us," SpiceJet Chief Executive Neil Mills told Reuters in an interview.

SpiceJet shares rose as much as 25 percent, while market leader Jet Airways (JET.NS) rose 8.5 percent. Shares of ailing Kingfisher Airlines (KING.NS) gained 3.7 percent.

Two of the country's major airlines, Kingfisher and state-owned Air India, are reducing capacity, which helped other carriers like SpiceJet push up fares.

Kingfisher is struggling to pay off its $1.3 billion debt and is flying just a fourth of its fleet, while Air India is afloat thanks to a $5.8 billion taxpayer bailout.

"I don't see Kingfisher adding capacity, neither do I see passengers shifting back to Air India, so I think this (profit) is very sustainable in the coming quarters," said Sharan Lillaney, an aviation analyst with Angel Broking.

SpiceJet posted a profit of 561.5 million rupees for the quarter ended in June, compared with a loss of 719.6 million rupees a year earlier.

Revenue surged 51 percent to 14.07 billion rupees.

Analysts had expected the carrier to post a loss of 707.5 million rupees for the quarter, according to Thomson Reuters I/B/E/S.

Passenger traffic rose 26 percent in the quarter and average revenue per passenger jumped 24 percent, Mills said.

SpiceJet cautioned in a statement that expensive fuel, mostly due to local taxes, and a weak rupee, combined with high airport charges, continued to hurt the sector.

State taxes of up to 30 percent raise the price of jet fuel, which accounts for about half of an airline's costs.

"Certainly we see that going forward, it will be more positive, but yes, there are challenges," Mills said.

"The issues that we raised, particularly around high taxation levels and a weak rupee, are certainly something that will continue to be a challenge for the industry."

(Editing by Michael Urquhart)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Pricing Controls

REUTERS SHOWCASE

India-China Relations

India-China Relations

India says to defend China border after standoff ahead of Xi visit.  Full Article 

Importing Iron Ore

Importing Iron Ore

As mining curbs bite, India offers market to glut-hit iron ore.  Full Article 

Drug Approval

Drug Approval

Epirus, Ranbaxy win India approval for arthritis drug copy.  Full Article 

Rajan Speaks

Rajan Speaks

RBI chief Rajan says limiting reliance on foreign debt.  Full Article 

Debt & Equity Deal

Debt & Equity Deal

KKR to lend $175 million to GMR Infrastructure - source.  Full Article 

Preparing for IPO

Preparing for IPO

Alibaba boosts IPO as demand strengthens.  Full Article 

India-Vietnam Ties

India-Vietnam Ties

India tightens Vietnam defence, oil ties ahead of China Xi's visit.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage