Can breakeven in FY09 even at current crude costs: SpiceJet

By Swati Khandelwal, CNBC-TV18

Domestic carriers are feeling the heat of spiralling fuel prices. Just a day after Jet Airways put a cost cutting plan in place, low cost airline SpiceJet is set to follow. The airline is still hopeful of breaking even this fiscal.  

Skyrocketing jet fuel prices may ground the plans of airlines the world over. After Jet, low cost airline SpiceJet is putting a cost cutting plan in place. The airline has already passed on the cost increase to consumers as fuel surcharge, which has led to a 5-7% drop in passenger load in comparison to last year.

Yields, though, are up by almost 35-40%. Despite the crude shock, SpiceJet hopes to breakeven this fiscal, if crude prices remains at current levels. In the first nine months of FY08, SpiceJet posted losses of nearly Rs 10 crore.

SpiceJet had raised Rs 300 crore last year and the company says part of the cash would be used to tackle the current price pressure. The carrier even plans to increase frequency and refuel aircraft at Hyderabad, Kochi, Rajasthan and Maharastra to benefit from the lower sales tax on ATF. ATF prices have gone up by 100% in the last two years. Currently, ATF accounts for more than 42% of an airline's total costs. SpiceJet has already either reduced frequency or withdrawn service on many shorter routes.

The total combined loss of domestic carriers in 2007-08 is estimated at about USD 1 billion, mainly on account of high fuel costs. According to industry estimates, ATF is priced 70% higher in India as against international benchmarks.