Jet Airways, SpiceJet's book values eroding rapidly: HSBC
Stubbornly high fuel prices, 11 percent rupee depreciation and lower load factors will lead to another quarter of losses for Jet Airways and SpiceJet for the December quarter.
While the proposal to allow 49 percent foreign direct investment in aviation bodes well for the future of the industry, the December-ending quarter results will still highlight some harsh realities.
Jet Airways, which is expected to announce its results on 20 January, is likely to post a loss of Rs 370 crore for the quarter at the group level, says HSBC Global Research in its latest report. Stubbornly high fuel prices, the sharp 11 percent rupee depreciation and lower load factors will see the airline experiencing another quarter of losses.
However, that is just the tip of the iceberg as the report points out that the substantial losses made by the airline in the past three quarters have been eating into its book value, which is expected to be largely eroded by the end of March 2012. (Simply put, book value is the company's assets minus its liabilites. It helps one understand what will be left with the company after it settled all its outstanding obligations and sold off all of its assets).
Overall, Jet is expected to post a loss of Rs 1,700 crore in the current financial year ending March, the brokerage added.
Things aren't looking any better for SpiceJet: the airline is expected to post a Rs 49.8 crore loss for the December quarter. While high fuel costs, weak load factors and a weakening rupee will affect SpiceJet, the big concern is its rising debt levels, which will lead to higher interest costs.
SpiceJet also does not have any asset support as most of its fleet is largely leased. In the case of this airline, too, continued losses are fast eroding its book value, the report added.
Jet Airways reported a steep loss of Rs 714 crore for the September-ended quarter- the sharpest fall ever.
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