SpiceJet and Jet Airways profits down by 24%, 70% due to fuel prices and demonetization

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SpiceJet, known for providing economical flights and being generally reliable, announced their net profits at Rs.181.1 crore – which is a 24% drop from the same time last year when the company made over Rs.239.9 crore.

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SpiceJet earned Rs.1,642.4 crore total income from operations this year, which is higher than the Rs.1,460 crore it made last year, but the increasing prices of aviation fuel increased costs from Rs.366.6 crore to Rs.473.7 crore. This coupled with decreased spending post-demonetization saw the low-cost airline take a hit on the bottom line.

A year ago, Jet Airways reported a net profit of Rs.467.1 crore but this year the net profit reported was Rs.142.4 crore in the October-December quarter, a drop of around 70%. Expenses for Jet Airways rose from Rs.1,209.2 crore last year to Rs.1,520 crore this year because of increased fuel costs and the demonetization effect.

Jet Airways has placed an order for new airplanes, which, according to CMD Ajay Singh “The new planes will significantly bring down cost of operations as the fleet will become superior. The new aircraft burns 20% less fuel. Engineering costs will also see a significant decline. Those contracts are being renegotiated. Financing cost of the aircraft will be less as well.”

It seems that the rising oil prices and cost of aviation fuel has started to impact the aviation sector. This dip in the profitability of carriers could see ticket prices and the cost of airfare go up significantly for the end customer.

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