SpiceJet’s FY20 Annual Results have some things to note

SpiceJet, the no-frills carrier, declared its annual results for the period April 2019 to March 2020 yesterday (along with Jan-Mar 2020 results), just an hour before IndiGo, India’s largest carrier, declared its Quarter 1 results (April-June 2020). I’m sure you would have read the headlines by now, else here is a summary.

  • Net loss of INR 807.1 crore compared to a net profit of INR 56.3 crore in the same period last year.
  • Revenue from cargo increased by 94%
  • Reports a net loss of INR 934.8 crore in FY2020

The important things to note, however, were in the notes to accounts. Here are some of those.

SpiceJet continues to recognise income from Boeing.

The Boeing 737 MAX was grounded in March 2019 and SpiceJet had inducted 13 in its fleet so far. For the fact that SpiceJet has these aircraft, but it could not use them for over a year, SpiceJet is owed compensation, which could come as cash or as discounts on further purchases and so on.

Boeing so far has publicly disclosed the dealings they have had with airlines concerning the 737 MAX compensation:

  • AeroMexico: Undisclosed Amount
  • American Airlines:  Undisclosed Amount
  • Southwest: Undisclosed Amount
  • Turkish Airlines: Reportedly USD 225 Million

Like you can see, when listed companies make deals, they have to disclose, and till so far, no compensation has been forthcoming to SpiceJet from Boeing. From SpiceJet’s notes to accounts,

the Company has initiated the process of claims on the aircraft manufacturer towards costs and losses, which are currently under discussion.

Yet, SpiceJet has over FY20, accounted for about INR 672 Crores as income on account of their grounded 737 MAX aircraft, being confident that this amount will be paid to them by Boeing.

Auditors note that Material Uncertainty related to Going Concern

The Auditors have pointed out that

the Group has accumulated losses, and its net worth has been fully eroded, the Group has incurred a net loss during the current and previous year and, the Group’s current liabilities exceeded its current assets as at the balance sheet date. These conditions, along with other matters set, indicate the existence of a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going concern. 

Bottomline

Ultimately, the airline has shown in its March 2020 balance sheet that they only have about INR 29.8 Crores in Cash and equivalents and INR 12 Crores in Bank Balances. The airline continues to make strides into new avenues such as cargo which will pay off. Still, the core operation is not great in terms of their liquidity at the moment, and that is going to be an area of concern for the passengers of SpiceJet. Not to forget, if the compensation from Boeing does not materialise or does not materialise to the extent, it would also have to be reversed from the books.

What do you think will the current financial year be like for SpiceJet?


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