Budget carrier IndiGo is expected to report a loss of Rs 2,670 crore for the June 2020 quarter, while its rival SpiceJet’s losses during the quarter are likely to be at around Rs 1,000 crore, owing to operational disruptions and low fixed cost coverage, a report said on Wednesday.
Regular operations of the domestic airlines remained shut between March 25 and May 24 on account of a nationwide lockdown to curb the spread of the coronavirus pandemic. The government allowed partial (one-third capacity) resumption of domestic commercial passenger flight services from May 25. The international operations, which were suspended from March 22, will however, remain grounded till at least July 31.
However, both IndiGo and SpiceJet along with some other carriers, including state-owned Air India, continued with cargo operations under the government’s LifeLine Udan scheme.
“We expect a net loss of Rs 26.7 billion for IndiGo and Rs 10.1 billion for SpiceJet in Q1FY21 driven by low traffic volume, low fleet utilisation and poor coverage of fixed costs,” brokerage firm Centrum Broking said in the report.
“Our estimates factor anticipated rationalisation in employee costs (factor 30-35 per cent down year-on-year) and other overheads,” it added.
An airline’s fixed costs comprise maintenance cost of grounded fleet, repayment of bank loans, aircraft lease rentals and staff wages, among others. The fixed costs account for 35-40 per cent of the total cost.