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SpiceJet gets relief from loss-making as cargo saves the day

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Low-cost carrier SpiceJet – plagued by long-running cashflow problems is looking to return to stability on the back of cargo expansion and with the hope of receiving recent vendor debt payments.

The airlines’ cargo arm, SpiceXpress, currently operating five narrowbody freighters, continues to stay in the black, reporting a net Q2 profit of $2.6m, versus $9.2m a year ago, with cargo loads pegged at 27,675 tons.

To double down on the cargo market for growth, the carrier is set to hive-off SpiceXpress into a standalone entity, a restructuring process it expects to close this quarter.

SpiceJet, which will continue to provide some services for the cargo arm, is expected to receive shares in the cargo carrier, which would be free to raise funds independently and partner with integrators or others in the booming e-commerce market.

Indigo, another budget airline of the nation and direct competitor of Spicejet, yesterday, with a converted A321, debuted its dedicated freighter service – branded CarGo – on the Delhi-Mumbai leg.

The airline said: “Delhi and Mumbai are the two biggest commercial hubs in the country, and the response we have received from customers for our service offering is very encouraging. We expect the business to grow over the coming few months, as we expand our fleet of freighters and add new destinations to our CarGo network.”

An influx of cargo-only start-ups, led by Delhi-based Pradhaan Air Express and Chennai-based Afcom Holdings is pushing the growth of air cargo capacity in India.

The Indian air cargo industry is having the best time. The government, with a robust national logistics policy now in place, is establishing as many as 33 new domestic cargo terminals by 2024-25, experts say.
However, they emphasize the need to accelerate efforts on automation and digitalization to maximize revenue streams, overcome supply chain obstacles and build better customer service. With expanding volumes, India needs to work more on ease of doing business in the cargo sector. Experts believe.

Meanwhile, keeping up with the pace of the growing airfreight volumes in India, global express logistics leaders like UPS and DHL have beefed-up services at Indian airports, including second-tier locations.
However, the passenger’s arm seems to be in murky waters. Overall, SpiceJet reported a net loss of $103m in the July-September quarter, widening from $69m a year earlier, on operating income that grew 45%.

“Having completed a series of settlements with most of our major partners and the upcoming hive‐off of our cargo and logistics arm, we expect significant improvements in our operating environment. We are well placed to script a new phase of accelerated growth and meet the resurgent demand from passenger and cargo customers.”

~ Ajay Singh, Chairman & MD, SpiceJet

“A near-normal business environment and an upturn in business and leisure travel, coupled with government aid, are giving hope to positivity,” Mr. Singh added. “High jet fuel prices and the depreciating rupee continue to be a downer for the industry, but the overall outlook remains positive.”

Mr. Singh had also pinned some hopes around the Indian government’s recent announcement enhancing credit limits for the airline industry, under the national “emergency credit line guarantee scheme”upto INR 15 billion.

But, SpiceJet is not alone in reporting continued losses. As per reports, IndiGo, SpiceJet, and Air India are thought to have accumulated a combined net loss of over $2.7bn last fiscal year, with IndiGo, the largest player, ending Q2 with a net loss of $364m, compared with a $330m loss a year earlier.

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