SpiceJet earnings: What really went wrong with the airline and can it turn around?

SpiceJet, now a shadow of its former self, declared its Q3, Q4 and full-year FY24 results on July 15, 2024. This is not the first time that the airline has delayed its results and has now become a habitual offender when it comes to delaying results. The airline declared a loss of ₹409 crore in FY24, while it recorded a profit in Q4 ( ₹119 crore) and a loss in Q3 ( ₹301 crore). The auditors continued their remarks casting significant doubt on the company continuing to be a going concern.

This comes after hiving off its subsidiary SpiceXpress on a slump sale basis and fund infusion from a sizable number of investors over the first few months of this calendar year. However, from its near-death experience in December 2014 to now, its accumulated losses have more than doubled to ₹7,812.5 crore. At the end of March 2015, after coming out of its near-death experience in December 2014, SpiceJet had accumulated losses of ₹3,210 crore.

What exactly broke its back?

For what was once a young and vibrant brand with orders for over 200 aircraft with Boeing aimed at fleet renewal and seeing multiple changes in ownerships, what exactly went wrong? The first was the grounding of the MAX aircraft following two fatal crashes. The airline had 13 MAX 8 aircraft in its fleet when the aircraft was grounded worldwide. This meant a sudden reduction in schedules and putting the brakes on its fleet renewal. The airline was often criticised for including large sums of money in its other income which was a potential compensation from Boeing but not yet formalised, and thus helping avoid larger accumulated losses.

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With airlines the world over scrambling to induct planes, especially the 737NG series, SpiceJet found an opportunity closer home since Jet Airways shut down in April 2019. The airline inducted around 30 aircraft which operated for Jet Airways and were now waiting for new owners. The quick change of lease within India also helped the lessor, who were otherwise used to long-drawn legal battles for taking their planes away from India, something which we are seeing now with Go FIRST.

This sounded like a masterstroke. SpiceJet had a 13.3 per cent market share in January 2019. It increased to 16.5 per cent in December. With the government linking slot allocation to capacity inducted, SpiceJet had found its lost mojo to climb back to where it was before the December 2014 crisis hit. Planes, pilots who had just lost jobs and were willing to jump, slots at airports and a sudden growth in a market which was deprived of capacity. The going looked so good that Emirates and SpiceJet signed an MoU for codeshare arrangement, something which never materialised later.

Also read: SpiceJet faces yet another insolvency case from engine lessor

Just when things were looking good, the pandemic hit. SpiceJet now sat with more planes than what it needed, with an inflated lease bill and employees along with a slot portfolio which was of no use as civil aviation came to a grinding halt. The company tried its hand at everything. From Spice Health during the pandemic days to operating widebody preighters (Passenger planes operating as Freighters) during the pandemic to shore up the revenue. It barely managed to survive.

As things started easing out, lessors started making a beeline for money; money which was non-existent with the airline by then. As disputes snowballed, they went to the doorsteps of the court and, in some cases, the National Company Law Tribunal (NCLT). A few vendors negotiated to settle for something, while a few others continued the fight. There also remains an unending litigation with the former owners, the Marans and their company KAL Airways. From engine to airframe, statutory dues to former owners - the woes seem unending even as it made settlement with a few lessors where the ownership of the planes was transferred to SpiceJet and in one case, the lessor agreed for equity in the company.

Is the turnaround possible?

Last year, the airline had a negative net worth of ₹3,231 crore, while this year it has bettered it to ₹2,585.8 crore. Accumulated losses increased from ₹7,415 crore to ₹7,812 crore. Yet, since the beginning of COVID, the airline has lost ₹4,611 crore. IndiGo, the only other listed airline in India, has lost ₹4,138 crore during the same period but has had some smashing quarters which included two where the profits were more than ₹3,000 crore or close to it. Potentially, IndiGo can overcome its losses in two quarters but SpiceJet can’t.

ALSO READ: SpiceJet says lessor returns one plane taken back during crisis

The future of the airline will depend on how much fund infusion is possible from promoters, banks or additional investors. In a market which is growing steadily, capacity will always be the king but capacity can only be added if there is money. Can the airline hold its flock together any longer? It had defied all odds to keep them together, especially pilots at a time when other airlines are expanding fast.

Indian aviation is riddled with failures, and for most airlines, it has come at a time when it was least expected or when they were considered too big or savvy to fail. SpiceJet, on the other hand, has survived after each fall so far. Can (Ajay) Singh be the King again?