Spicejet making news: Posts Profits, Leases Aircraft to Saudi Arabia

In the wake of the increase in fuel prices and the deterioration of rupee vis-à-vis dollar, the airlines saw their profit being eroded and losses being reported, to the tune of 2 billion dollars. The only airline which survived this mayhem and posted the profits in the last quarter was the budget carrier Indigo Airlines. While the market share of Indigo has surged to make it a leading player in the aviation industry, the number two market player in the budget airline segment, Spicejet, has turned the tables in this quarter. It has reported a profit of $10.15 million for the quarter ended June, 2012.

The reported profit of this budget airline which provides the cheap air tickets has surprised many analysts who were expecting the airlines to report losses in this quarter as well assuming that these might not be able to recover from their losses yet. With rupee still not getting stronger even while the reduction in the fuel prices has happened, the conditions were not expected to be ripe for airlines to post profits even in this quarter. For this reason, this announcement has surprised many experts and even more surprising is the quantum of profit being reported. The main reason attributable for this development is that the Kingfisher Airlines and Air India, the two major airlines, have been in trouble for their own reasons which have prompted them to cut the capacities. This has benefited the other airlines providing cheap air tickets by making them carry more passengers as well as tempting them to raise the air fares.

Spicejet is also making news for leasing out two of its Boeing aircrafts to the Nas Air, the Saudi budget airline. This is a wet lease arrangement for a short term in which the operational and maintenance expenses are borne by the leasing airline. By entering into the arrangement, Spicejet has found a way to earn revenue by doing away with its excess capacity for the Indian lean season and also by utilizing the chance provided by the annual Haj Pilgrimage.

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