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SpiceJet daily losses at up to Rs 7.5 million

SpiceJet Ltd is posting daily losses of Rs 5-7.5 mn a day on high jet fuel prices and will cut routes and delay plane deliveries to trim losses, its executive chairman said.
Reuters | By HT Correspondent, New Delhi
UPDATED ON JUL 02, 2008 02:27 PM IST

Low-cost carrier SpiceJet Ltd is posting daily losses of 5-7.5 million rupees a day on high jet fuel prices and will cut routes and delay plane deliveries to trim losses, its executive chairman said.

The price of jet fuel, which accounts for nearly 45 per cent of carriers' operating costs, has risen more than 83 per cent in the year, prompting Indian carriers to cut capacities and raise fares.

"We are negotiating further capacities and probably may not take delivery of two to three aircraft this year," Siddhanta Sharma told NDTV Profit television.

"There are one or two aircraft, which are very close to delivery. Unfortunately we can't delay those. But anything which is two-three months or beyond, we would be deferring those."

SpiceJet stock has lost three-fourths of its value this calender year, compared with the broader market index, which has fallen more than a third, on investor worries the carrier will continue to bleed on rising fuel prices and a slowing economy.

Sharma said the present load factor, a measure of how well it fills its planes, was at 65 per cent, about 8 per cent lower than the year ago period.

SpiceJet will not increase ticket prices, after Indian Oil raised jet fuel prices by more than 4 per cent on Monday, as the government had cut import duty on petroleum products in June, providing relief to the carriers.

"We'll keep our bargain," Sharma said, adding he was hopeful of a favourable decision by a committee constituted by Indian government to look into high taxes levied by state governments on jet fuel prices.

Sales tax is fixed by states and jet fuel is taxed by between 4-28 per cent across the country. Sharma said out of the cost of 70,000 rupees per kilolitre of jet fuel, 15,000 rupees go towards various sales taxes.

"If sales tax, especially imposed by states, comes down to declared goods level then we should see atleast sustainable operations of airlines in current fiscal," he said.

By notifying jet fuel as "declared goods", the states will charge a uniform sales tax of 4 per cent, though state finance ministers are discussing a proposal from India's Civil Aviation Minister to peg it at a uniform 3 per cent.

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