Indian low-cost carrier SpiceJet posted a loss of ₹998.3 crores ($134.2mn) for the financial year. The only standout continues to be cargo, where SpiceJet’s revenues jumped by a massive 514%. To weather the coming year, the airline is planning to raise ₹2,500 crores ($336.1mn) to bolster its finances.
Losses shrink
While SpiceJet expectedly ended the financial year with deep losses, it has managed to make a recovery last quarter. From January to March (Q4 of FY21), the carrier only reported a net loss of ₹235.3 crores ($31.6mn), down 70% from the same time last year.
While passenger revenues improved slightly, the narrowing of losses was driven by a continued rise in cargo traffic, which is up a few hundred percent since last year. However, revenues were down 28% as passenger traffic began falling due to the rising second wave in March.
The financial year (April 1st, 2020 – March 31st, 2021) ended in an expected loss. The airline saw a net loss of ₹998.3 crores ($134.2mn), with revenues down over 53% compared to the previous year. This is largely due to the grounding of all passenger flights for two months last year and the slow recovery ever since.
However, there was one standout in the balance sheet: cargo. SpiceJet saw its cargo revenues rise a colossal 514% compared to the same quarter last year. Freight revenue has been critical to the airline surviving this crisis and having enough cash. However, despite this, cargo continues to account for less than 20% of total revenue for the quarter.
Second wave
While SpiceJet managed to weather the March quarter with relative ease, the next quarter will not be as kind. The second wave of COVID-19 decimated passenger traffic once again and saw SpiceJet’s market share slip to single digits. This likely means deep losses for the coming quarter as the airline struggled to pay salaries in April and May due to low cash.
To combat the effect of the severe second wave, the carrier is planning to raise ₹2,500 crores ($336 million) through qualified institutions. According to Mint, this will be used to strengthen the balance sheet after a difficult year. The raise has been approved by the board and can take a few months to be completed.
Notably, SpiceJet continues to depend on revenue from the grounded 737 MAX fleet of 13 planes. As of December 2020, the carrier has recorded over $150 million in compensation from Boeing for its lost revenue. However, auditors have repeatedly warned that there is no certainty that Boeing will pay this full amount, and it ideally should be used to reduce loss, according to The Print.
Despite this, the carrier continues to offset losses using potential future compensation from the manufacturer. If this ever comes to fruition, remains to be seen. For now, SpiceJet is hoping that its fundraising and improving passenger traffic will allow it to survive 2021, which is proving to be almost as challenging as the last year.
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