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Fall in passenger yields may continue, says SpiceJet CMD

FE Bureau
SpiceJet CMD Ajay Singh (left) and Gulf Air CEO Kresimir Kucko at a function to sign an MoU between the airlines, in New Delhi on Wednesday (Image: PTI)

The declining trend in passenger yields for airlines witnessed in Q3FY20 so far may continue in the coming quarters, Ajay Singh, chairman and managing director, SpiceJet, said on Wednesday.

Singh said yields have fallen in the December quarter as budget carriers are offering lower fares on routes earlier operated by Jet Airways to stimulate demand.

"The Jet Airways capacities has been distributed among the low-cost carriers and they are offering reduced fares. Also, that capacity would take time to establish for the airlines," Singh told reporters, without elaborating on the quantum of decline.

While SpiceJet's operating revenue jumped 52% year-on-year to Rs 2,845 crore on the back of higher passenger count, its costs shot up due to operating lesser seats on the 31 Jet aircraft and their maintenance. It posted a loss of Rs 463 crore in the quarter ended September 2019.

Analysts pointed out that yields at SpiceJet would remain flattish in Q3FY20 due to pricing competition from rival carriers. "SpiceJet's yield expansion has slowed, and flattish yields are expected in Q3FY20. Pricing pressure due to flash sales by a rival airline depressed yield growth in a traditionally strong quarter," analysts at brokerage firm Edelweiss noted.

SpiceJet's yield expanded at 1.9% y-o-y in Q2FY19, below analysts expectation of 3.5% y-o-y increase.

Meanwhile, the Gurugram-based carrier will start flight operations between India and Ras Al Khaimah by early next year followed by setting up a new airline in the UAE city.

"Just like we operate flights to Dubai, we can operate flight to Ras Al Khaimah. We will start the flight operations first and explore the market, because we believe there are good possibilities. From Ras Al Khaimah, there are onward (flight) possibilities to Eastern Europe, Africa and around the middle-east countries," Singh said.

The airline is likely to use Boeing 737 Max fleet for Ras Al Khaimah operations, when it returns to service next year.

SpiceJet and Bahrain's national carrier Gulf Air on Wednesday signed a Memorandum of Understanding (MoU) to explore possibilities regarding interline and codeshare agreement, coordinated cargo services, engineering services and pilot training. The MoU was signed by Singh and Krešimir Kucko, chief executive officer, Gulf Air.

SpiceJet shares closed Wednesday's session at Rs 111, up by 1.5%, on the Bombay Stock Exchange.