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Higher than expected yields result in lower than anticipated losses
• SpiceJet Ltd (SpiceJet) reported a 40.6% Y-o-Y growth in passenger revenues of `11.5 bn
driven by a 20.4% Y-o-Y growth in RPKM and 17.6% Y-o-Y growth in yields (revenue/RPKM). The
124% Y-o-Y growth in other operating revenues led to a 41.6% Y-o-Y rise in total income which
stood at `11.76 bn.
• Fuel costs rose by 90.1% Y-o-Y (in-line with our estimates) while staff cost and other operating
expenses were below our estimates. Driven by higher fuel expenses, the EBITDAR margin
declined to 12% in Q3FY12 as compared to 26.5% in Q3FY11. The company reported an EBITDA
loss for the fourth consecutive quarter which stood at `190 mn as compared to an EBITDA
profit of `1.14 bn in Q3FY11.
• The company reported a standalone net loss of `393 mn in Q3FY12, which was above our
estimates led by higher revenues and cost curtailments.
Result Highlights
PLF declined as significant fleet addition was witnessed in the quarter
The passenger load factor (PLF) declined by 770bps Y-o-Y to 80.1% as the capacity (ASKM) grew 32%
Y-o-Y with fleet addition. The PLF rose from 64.4% in the previous quarter as Oct-Dec is the peak
season for air traffic. The average fleet size rose to 36.7 in Q3FY12 as compared to 30.6 in Q2FY12
and 22.4 in Q3FY11.
Higher fuel costs partially negated by higher yields
With the peak season, yields improved 17.6% Y-o-Y and 15.2% Q-o-Q to `4.07. The higher yields
helped negate the 90% rise in fuel cost. Consequently, the fuel expenses as a percentage of sales
stood at 50.4%, a sharp improvement from the previous quarter when they stood at 62.4%.
Bombardier fleet to result in higher depreciation and interest outflow going forward
SpiceJet was able to increase its market share to 14.4% in CY11 as compared to 13% in CY10 due to
the addition of 7 Bombardier aircraft. The purchase of these aircraft should result in higher
depreciation and interest outflow for the company over the next few years. However, the debt
position of SpiceJet is relatively far better than its other listed peers which according to us is a
clear advantage for growth.
Valuation & Viewpoint
The outlook for the sector remains weak with currency headwinds and high ATF prices. However,
any change in FDI policy and reduction of sales tax on ATF can be positive for the entire sector.
Moreover the successful inclusion of all 30 Bombardiers within its fleet should result in the
company managing to garner a greater market share and capture the growing pie of LCCs in the
domestic aviation industry. Consequently we believe the stock has multiple growth triggers and can
be accumulated at current levels.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Higher than expected yields result in lower than anticipated losses
• SpiceJet Ltd (SpiceJet) reported a 40.6% Y-o-Y growth in passenger revenues of `11.5 bn
driven by a 20.4% Y-o-Y growth in RPKM and 17.6% Y-o-Y growth in yields (revenue/RPKM). The
124% Y-o-Y growth in other operating revenues led to a 41.6% Y-o-Y rise in total income which
stood at `11.76 bn.
• Fuel costs rose by 90.1% Y-o-Y (in-line with our estimates) while staff cost and other operating
expenses were below our estimates. Driven by higher fuel expenses, the EBITDAR margin
declined to 12% in Q3FY12 as compared to 26.5% in Q3FY11. The company reported an EBITDA
loss for the fourth consecutive quarter which stood at `190 mn as compared to an EBITDA
profit of `1.14 bn in Q3FY11.
• The company reported a standalone net loss of `393 mn in Q3FY12, which was above our
estimates led by higher revenues and cost curtailments.
Result Highlights
PLF declined as significant fleet addition was witnessed in the quarter
The passenger load factor (PLF) declined by 770bps Y-o-Y to 80.1% as the capacity (ASKM) grew 32%
Y-o-Y with fleet addition. The PLF rose from 64.4% in the previous quarter as Oct-Dec is the peak
season for air traffic. The average fleet size rose to 36.7 in Q3FY12 as compared to 30.6 in Q2FY12
and 22.4 in Q3FY11.
Higher fuel costs partially negated by higher yields
With the peak season, yields improved 17.6% Y-o-Y and 15.2% Q-o-Q to `4.07. The higher yields
helped negate the 90% rise in fuel cost. Consequently, the fuel expenses as a percentage of sales
stood at 50.4%, a sharp improvement from the previous quarter when they stood at 62.4%.
Bombardier fleet to result in higher depreciation and interest outflow going forward
SpiceJet was able to increase its market share to 14.4% in CY11 as compared to 13% in CY10 due to
the addition of 7 Bombardier aircraft. The purchase of these aircraft should result in higher
depreciation and interest outflow for the company over the next few years. However, the debt
position of SpiceJet is relatively far better than its other listed peers which according to us is a
clear advantage for growth.
Valuation & Viewpoint
The outlook for the sector remains weak with currency headwinds and high ATF prices. However,
any change in FDI policy and reduction of sales tax on ATF can be positive for the entire sector.
Moreover the successful inclusion of all 30 Bombardiers within its fleet should result in the
company managing to garner a greater market share and capture the growing pie of LCCs in the
domestic aviation industry. Consequently we believe the stock has multiple growth triggers and can
be accumulated at current levels.
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