Sub-lease aircraft, pare lean-season losses

BANGALORE: Having taken a big hit on yields during the lean season (January and February), budget carrier SpiceJet will hedge itself during the next lean phase (July -September).

How will it offset the lean  season? By sub-leasing aircraft from its fleet to European carriers during the lean season, it earns additional revenue.

SpiceJet will also try to increase ancillary income, CEO and chairman Siddhanta Sharma told analysts at a conference call on Wednesday.

“June-end to September is the peak season in Europe, so we will sub-lease aircraft to European airlines in that period rather than bleed locally. It will earn us good income. We will also increase ancillary income from sale onboard and in-flight advertisement,” said Sharma.

The latter’s a flight path that Air Deccan has taken for long. SpiceJet’s yields in the previous quarter slipped as it expanded its fleet from six to 11 aircraft since October.

The low cost carrier’s yield has tumbled from Rs 2.20 in December to Rs 2.16 in January. It fell further to Rs 1.96 in February.

Besides capacity addition, Sharma also blamed competition for the drop in yield.

What is surprising is that the fall in the yield has come despite a reduction in the cost per available seat kilometre (CASKM).

The budget carrier has managed to cut its CASKM by around 8% over the last one year.

“Today, we have the lowest cost in the industry. We have brought it down to Rs 2.44 per ASKM in the February quarter from Rs 2.65 per ASKM during the same time last year. We did that despite a rise in fuel cost from Rs 1.07 per ASKM to Rs 1.11 per ASKM. Our non-fuel cost for the same period is down from Rs 1.85 to Rs 1.33,” Sharma said.

This was lower than Air Deccan’s CASKM, which is at Rs 2.70 (on Airbus) and Rs 3.10 (average of Airbus and ATR), Sharma claimed.