A good crisis separates the men from the boys, goes the adage. If the judgement of stock market investors counts, SpiceJet Ltd doesn’t come out looking very good. In the past one year, when the airline industry grappled with lower yields, a spike in crude oil prices and a weaker rupee, the company’s shares have fallen 48%, while those of InterGlobe Aviation Ltd (which runs IndiGo) have corrected only 6%.
At first glance, a comparison of the Q3 results of the two airlines suggests there isn’t much that separates the two. Both airlines broke even last quarter, following a strategy of chasing yields at the cost of lower load factors. But some analysts are concerned that SpiceJet’s profits were boosted by an unusual jump in other operating income. This was on account of cash incentives booked while inducting new aircraft.
