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SpiceJet posts record quarterly loss, screams the headline, but in reality its results are nothing worth writing about. The company has made so much losses over the past few quarters that it has completely eroded its net worth.
ALSO READ: Record Rs 559-cr loss hits SpiceJet
It is not the loss at the net level of Rs 559 crore for the September 2013 quarter that is worrisome, but it is the huge operating loss that questions the viability of the company. With its net worth completely eroded, rising operating losses will take the company down the same road as Kingfisher.
On a revenue of Rs 1,257 crore, the company made an operating loss of Rs 492 crore. With a negative net worth and a operating loss, the company will find it difficult to raise funds. Equity or loan from the promoter or a stake sale is the only way out for the company. Even Jet Airways makes losses, but it does mainly on account of interest outgo. Even with a small operating loss, Jet Airways is having difficulty paying its lessor and airport charges. Spicejet on the other hand is incurring losses on every passenger it flies.
Almost everything that could have gone wrong has gone wrong for SpiceJet in the September quarter. Low tariff, high fuel prices, adverse impact of currency, high maintenance cost have been cited as reasons for its losses. Some of these reasons will continue over the next few quarters, which makes the scenario scary.
Irrespective of the fact that tariff rates have gone up in the current quarter, SpiceJet does not have much room to wriggle out of the current downturn.It will need fund infusion to pay its bills. Targeting international routes will bring some relief, but it does not have the luxury of time to grow that business. Small amount of fund infusion like the Rs 100 crore pumped in by Maran last year will evaporate in no time, given the rate at which the company is bleeding. A strategic sale or an extensive funding plan from the promoters is the only way left for the company to prevent a crash landing.
Looking at the current external environment, we may need to call the fire department for an imminent crash landing.
