SpiceJet’s Q2 results will be old wine in a new bottle, what holds ahead?

All eyes are now on the meeting later today. Will it be an announcement that matters or another rumour being given tailwind?

SpiceJet - once India’s second-largest carrier by market share will declare its results today, December 12 for Q2-FY24. The airline was expected to declare its Q2FY24 results on December 11. Moreover, the board meeting scheduled to discuss fundraising was postponed, and it is anticipated that the board will engage in discussions regarding fundraising today, December 12.

This is not the first time that the airline has delayed the filing of its results. The last quarter has been anything but normal for the airline and comes within months of successfully hiving off SpiceXpress - the cargo arm. The quarter saw the airline push Akasa Air back and gain a spot in market share. This was largely due to the sudden shrinking of Akasa Air rather than SpiceJet growing rapidly.

As the board meets to approve the results, it also plans to take up options for raising funds - a much-needed step that hasn't seen the day of light for a very long time. In anticipation, the share price has gone up by 20 percent in the last few days. The last time the share price saw a steep jump was when there were rumours of Mr Gangwal investing in SpiceJet, which was denied later.

Also read: SpiceJet shares fly 7% higher on airline's plans to list on NSE soon

Muted traffic

This year will see the highest-ever domestic traffic in India, surpassing the pre-COVID numbers. For SpiceJet, the traffic has been lower than the previous year though and nearly one-fourth of pre-COVID.

The airline has been in a vicious cycle where its lower fleet and higher debt do not allow the airline to earn enough to repay the debt or retire some of the debt and move towards profitability. The net worth remains negative, accumulated debt is high and the auditors continue to raise concerns about the airline being able to continue as a going concern.

While most of these concerns have been around for a while, the court cases are fairly new where the court has observed delays in payments and in one instance asking the chairman Ajay Singh to be present in the court. From lessors to former owners Marans, the list of litigations is unending and would tire any company, yet SpiceJet is moving from one battle to another and continues fighting to see another day.

Finances still facing headwinds

The airline declared a profit of Rs 197 crore in Q1-FY24, which is its highest in the last four years. However, the airline has a much smaller operational fleet than it had in the past. The grounded fleet, the delivery of MAX which it announced but never took, wet leases and delayed flights have led to its reputation facing flak in the market.

How will the airline close this quarter? All indications are towards an operational loss. The airline has time and again had “other income” reflected in the balance sheet, at times not agreed by the auditor but something which has helped it swing to profit. In the end what matters is not numbers on the balance sheet but the cash in the bank, which has been a challenge for multiple years.

With about 2,000 fewer departures sequentially and 5 lakh fewer passengers, the domestic traffic has been anything but good for the airline. Its international presence has shrunk and lease liability has remained the same, putting more pressure on the finances. The airline has also had to make payments to various parties which approached the courts.

Can it pull the premium?

The airline has been in the news for extremely high delays, cancellations, and in one case being asked to divert to another airport due to a dispute leading to the grounding of aircraft, which the airline later said has been reversed following a favourable order from the court.

In such a situation where the liabilities are very high, the light at the end of the tunnel has continued to fade and problems mount each day, does someone see value in the airline? This comes at a time when its market share has remained miniscule and IndiGo and Air India group will be locked in a duopoly. With Air India Express slated to induct 50 737 MAX aircraft in the next 15 months, the demand for qualified pilots will be at an all-time high and the 737 rates pilots who had a bleak future post-fall of Jet Airways could sing a different tune now. That potentially could see SpiceJet pilots leave in hordes and the airline being unattractive for pilots - the most priced resource in the market right now.

All eyes are now on the meeting later today. Will it be an announcement that matters or another rumour being given tailwind?