SpiceJet shares spike ahead of earnings— losses are certain, but cargo operations may hold some respite

• Spicejet is expected to report a washout quarter as the aviation sector bore the brunt of the two-month-long lockdown.
• The investors have high hopes from the company’s cargo operations— the share price has gained nearly 45% since the beginning of the first quarter.
• According to Centrum Broking, SpiceJet’s losses are likely to widen up to around ₹1,000 crore.

The shares of India’s largest cargo operator, SpiceJet, advanced 4% ahead of the first quarterly earnings tomorrow.

Spicejet is expected to report a washout quarter, as the whole aviation sector felt the impact of the two-month-long lockdown. However, SpiceJet’s investors have hopes from the company’s cargo operations— the share price has gained nearly 45% since the beginning of the first quarter.

Although the amount of cargo it carried was comparatively lower than pre-COVID levels, the upper hand of being the largest cargo operator is that it never brought its whole business to a grinding halt during the lockdown. The budget carrier also expanded its cargo network to counter the low passenger services hit on account of the pandemic. Spicejet’s cargo load saw a significant increase during the April to June quarter.

Source: DGCA

Losses for the quarter may further widen

In the last quarter, SpiceJet recorded a net loss of ₹807 crore, when the lockdown impacted its operations for just seven days. And, the numbers are likely to swell further in the quarter under review.

Here’s how SpiceJet has performed over the last few quarters:

According to Centrum Broking, SpiceJet’s losses are likely to widen up to around ₹1,000 crore, owing to operational disruptions and low fixed cost coverage. The numbers are significantly better than what the brokerage projected for IndiGo, owing to SpiceJet’s smaller share in the market and strong foothold in cargo operations.

Air traffic took a massive hit

Since the lockdown was lifted, nearly all sectors have resumed operations to near-normal levels, but the pessimism around the aviation industry persists. And the Directorate General of Civil Aviation data is proof of that. Spicejet carried 92% fewer passengers than it carried last year in the same quarter.

Source: DGCA

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