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SpiceJet's turnaround continues, reports highest ever quarterly profit

SpiceJet on Tuesday posted its second straight quarterly profit at Rs 71.8 crore in the three months ended June, helped by a steep 42 percent reduction in costs and higher seat occupancy.

New Delhi: Budget carrier SpiceJet, which was on the verge of closure late last year, Tuesday posted its second straight quarterly profit at Rs 71.8 crore in the three months ended June on lower expenses and higher seat occupancy.

Announcing its quarterly earnings, the Gurgaon-based airline also said it plans to buy new aircraft for fleet expansion. The low-cost carrier had posted a net loss of Rs 124.1 crore in the 2014 April-June quarter.

"We intend to place orders for new aircraft during this financial year and it would be an outright purchase. However, we have not yet decided what type of aircraft we should go for but the decision will be based on the commercial interest of the airline," SpiceJet chairman Ajay Singh said.

Currently, SpiceJet has 34 aircraft in the fleet, comprising 18 Boeing 737s, two Airbus A319 (on wet lease) and 14 Bombardier Q400.

Singh said the airline would continue to lease more aircraft till the new ones are delivered. "We have plans to induct 3-4 more planes for the winter schedule."

The latest quarterly net profit would have been higher but for the wet-lease of aircraft during last three months.

Snapping seven-straight quarters of loss, the budget carrier had returned to the black with a Rs 22.1 crore net profit in the three months ended March, 2015 after original promoter Ajay Singh took control.

"We are working hard to build a world class airline again... This is the second consecutive profitable quarter and I am proud of what we have achieved. But there is still a long way to go," Singh said.

"The profit that we have posted is pure operating profit but it shows we are on the right track," he said.

However, SpiceJet's sales from operations declined by 34 percent to Rs 1,106.3 crore in the first quarter of current fiscal. In year-ago period, it stood at Rs 1,691.04 crore.

The airline, however, justified the sharp decline in sales to reduction in capacity.

In line with year-on-year capacity reduction of 33 percent that was driven by fleet reductions in late 2014, the airline's revenue for the latest June quarter was down 34 percent compared to the year-ago period.

"We have been able to manage the total revenue of the planes that we are flying to keep it at the same level, Moreover, our total yield has also been the same as the load factor has increased in proportion to the drop in fares," Singh said.

Profit in the first quarter of current fiscal "was slightly suppressed due its wet-lease operations which are by nature more expensive than conventional leases, and by a weaker rupee relative to previous year", the carrier said.

The wet lease aircrafts were taken up to address the short-term capacity shortage arising out of aircraft unavailability, SpiceJet said in a statement.

The wet-leased are expected to be replaced by traditional dry-lease aircrafts in coming months.

Costs for the quarter were down 42 percent relative to same period last year.

"The cost has come down because of the lower fuel prices. Besides this, other costs like charges at certain airports have also come down. We have also streamlined operations in terms of number of stations. And all these measures have resulted in an overall cost reduction of 42 percent during the quarter," Singh said.

Singh said that the SpiceJet would take some other long-term cost-control measures such as reducing maintenance and acquisition costs going forward.

When asked about fund infusion, Singh said that it would depend on the airline's requirement for cash.

SpiceJet's Chief Financial Officer Kiran Koteshwar emphasised that the carrier is "no longer under financial stress".

The airline also carried more passengers in the latest quarter under review, with the load factor touching almost 90 percent. However, the cost per available seat kilometre (CASK) was down 13 percent.

With the return of Singh, the airline has been able to gain market confidence and "address many of seemingly intractable issues that were holding us back earlier across several dimensions, including very importantly on the costs and funding side", SpiceJet's Chief Operating Officer Sanjiv Kapoor added.

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