Mumbai: No-frill carrier SpiceJet, reported a loss for the first time in the last 14 quarters, due to provisioning for arbitration order during the quarter. The airline industry which is suffering from high costs on the back of a falling rupee and high oil price, hopes to mitigate costs by inducting fuel efficient Boeing 737 Max into its fleet. Edited excerpts from an interview with SpiceJet’s chief financial officer (CFO) Kiran Koteshwar.
The current cost environment is not conducive for airlines.
The rising crude price and the exchange rates, in particular, are hurting the airline. The exchange rate (in particular) is a concern. And (the upcoming) Q2, FY 19 (July-September period) being a soft quarter, we could have some problems. We will have to make sure that Q3 (October-December quarter) offsets some of pressures of Q2, which is a traditionally weak quarter.
What measures are you taking? Are you hedging your fuel and currency?
We would have loved to but we don’t have an option. We unfortunately can’t hedge fuel for more than three months. Also, hedging prices are very high and there’s no point in hedging at such high costs.
How will you achieve a strong Q3?
The induction of fuel efficient Boeing 737 Max aircraft will help us save costs. On Max aircraft, there’s a lot of advantage on range and operating mechanics. We expect at least 8-9% cost savings (coming) from the new aircraft.
When are you taking delivery of your new aircraft including Boeing 737 Max and Bombardier planes?
We will take the first 737 Max in sometime. We are waiting for the firm dates (from Boeing). We are trying to get at least 15 aircraft, including 4 Q400 in FY 2018. Q400 will be deployed in RCS (regional connectivity scheme) as well as non-RCS routes.
Has the airline been able to pass on costs to customers?
This is a continuous exercise. We always try to pass on increasing costs to customers. But, in India, there is a certain price point beyond which you can’t increase prices.
At what price point, of both oil and rupee against dollar, will the airline be comfortable to report consistent profits?
For an airline to report profit oil should be about $ 65 a barrel and rupee around 67 against dollar. Despite the price of fuel bouncing back a bit, the rupee depreciation is hurting us. Fuel price falling is a good sign but we will have to wait and see how the rupee rises or falls against dollar.