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Investors see a ray of hope in SpiceJet's dismal Q1 numbers

Even as SpiceJet is struggling in the passenger segment, it claims to have emerged as the largest air cargo airline in the country, ahead of carriers like IndiGo and Air India who have bigger fleets

twitter-logoManu Kaushik | September 15, 2020 | Updated 23:15 IST
Investors see a ray of hope in SpiceJet's dismal Q1 numbers

Let's hear the bad news first. The country's second largest airline SpiceJet today posted heavy losses to the tune of Rs 593.4 crore on revenues of Rs 709.76 crore which dropped a whopping 77 per cent over the same quarter last year. The sharp dip in revenues and losses were largely expected as the entire aviation sector suffered a massive shock due to pandemic. SpiceJet also reported that it's operating capacity at 47 per cent of the pre-COVID schedule since flight services resumed on May 25. For instance, if the low-cost carrier previously had 570 flights daily, it's now taking about 268 flights. This is expected to rise as Ministry of Civil Aviation (MoCA) has permitted 60 per cent operational capacity for airlines. Civil Aviation Minister Hardeep Singh Puri has suggested that passenger traffic would reach pre-COVID levels by the end of December.

Even as the airline is struggling in the passenger segment, it claims to have emerged as the largest air cargo airline in the country, ahead of carriers like IndiGo and Air India who have bigger fleets. SpiceJet also claims that it's operating a fleet of 13 cargo aircraft, including wide-body Airbus A340 and A330 aircraft, Boeing 737s, and Bombardier Q-400s.

ALSO READ: SpiceJet posts Rs 600.5 crore net loss in Q1 amid COVID-19 lockdown, finances deteriorate

"SpiceJet established itself as country's largest cargo operator and operated more than 7,000 flights and transported around 50,000 tonnes of cargo since March 2020. Out of these flights, 40 per cent were to international destinations," the airline said in a statement adding that its cargo network spans over 63 domestic and 44 international destinations.

This is in fact bigger than its passenger network of 54 domestic and 9 international destinations (as on March 2020). The size of SpiceJet's cargo operations is even bigger than dedicated freighter services. Blue Dart Aviation, for instance, has a fleet of six Boeing 757 with a network payload of 504 tonnes across 74 route connections each night, as per company's website.

Even though the demand jump was unexpected and sudden, SpiceJet's has managed to design its cargo network in such a way that it can tap demand across markets. For example, Bombardier Q-400 cargo freighters, with capacity of 8.5 tonnes, can cover Tier II and III cities, remote and hilly areas in the North East, Jammu and Kashmir, and Himachal Pradesh. The widebody A330 and A340 aircraft cover long- and medium-haul international destinations in Europe, Africa and CIS (Russia, Ukraine, etc). Everything in between is covered by Boeing 737s.

ALSO READ: Cap on flights shields SpiceJet, GoAir; delays recovery

An aviation expert says that during the COVID-induced lockdown, domestic airlines converted passenger planes for cargo operations. This helped them mobilise essential materials such as medical and surgical supplies, sanitisers, face masks, rapid test kits, IR thermometers, etc. In the first quarter earnings call, IndiGo's CEO Ronojoy Dutta had said that the airline has witnessed a great deal of potential in its cargo business, and to explore this opportunity further, it has converted 10 aircraft to "all cargo airplanes".

It's now believed that the trend which started in April is likely to continue for a long time. Why? As per global body International Air Transport Association (IATA), it would take equivalent of 8,000 Boeing 747s to airlift and deliver the coronavirus vaccine across the globe once it's ready. What does it mean for domestic carriers?

"The market for freighters during and after the pandemic is going to be huge. Operators like SpiceJet can play a crucial role in micro-distributing the vaccine across parts of the country. The time for freighters has come," says Mark Martin, CEO, Martin Consulting.

But some experts believe that the time for freighters was always there. One can recall times when Air India had 10 freighters in 1985 which were flying between India and Dubai, London, and New York. "The first big revival for freighters had come around seven-eight years ago when e-commerce companies started using them for logistics. The need to transport essential goods during COVID has further spiked the demand," says an aviation analyst.

ALSO READ: Unlock 4.0: Domestic airlines allowed to operate at 60% capacity

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