Edelweiss sees SpiceJet break-even by Feb next

MUMBAI: A report brought out by equity research firm Edelweiss Capital says the erstwhile Royal Airways Ltd, now rechristened SpiceJet Ltd, will achieve a break-even at the net level by the third quarter of the next fiscal.

The budget carrier, which launched its operations under the new management in May last year, has already achieved a break-even at the EBIDTAR level in the nine months of operations ended February. During this period, the company has posted a 62% quarter-on-quarter jump in sales to Rs 132 crore from Rs 81.5 crore during the same period last year.

But, even as analyst Nikhil Garg, who has authored the report, pats the budget carrier’s back on its current financial performance, he puts out a word of caution. In his performance sheet of SpiceJet, Garg warns that his predictions may go awry if the carrier does not stick to its schedule of scaling up operations (involving aircraft acquisition).

Edelweiss has based its forecast of an early break-even on the assumption of a fleet size of 6, 15 and 23 by the end financial years 2006, 2007 and 2008 respectively.

“Any delay in expansion might lead to lower revenues and might impact profitability of operations. SpiceJet has to raise $100 million for making payments to Boeing for pre-delivery deposits for acquisition of 20 aircraft. The operation will get affected if it is not able to raise the funds,” said the report.

Soaring aviation turbine fuel prices and competition from new budget carriers, likely to take wing before the end of this year, could also slow SpiceJet’s race for achieving an early break-even, the report says.