Jet Airways and SpiceJet, the two airlines traded on the bourses, were a study in contrasts last year.

While the Jet stock was on a roll and nearly doubled, SpiceJet’s turbulent ride through a near-death experience before being given a fresh lease of life reflected in the stock’s wild gyrations — it’s now up 31 per cent over the year. For the nine months ended December 2014, Jet, aided by one-off gains, reduced its loss 94 per cent year-on-year, while SpiceJet’s increased 4 per cent.

Jet benefited from a few factors. Its credit rating was upgraded, thanks to improved liquidity with help from partner Etihad. The blueprint to turn the airline profitable in three years by rationalising routes, expanding international operations and going completely full-service helped.

So did the deep cut in ATF costs, courtesy the rout of crude oil.

Profits in the September and December quarters also boosted investor sentiment. Besides, speculation that SpiceJet’s loss could be Jet’s gain worked to the latter’s advantage. Indeed, most gains in the Jet stock have been post November, when trouble in SpiceJet reached crisis proportions.

SpiceJet, which had launched a discount blitzkrieg, found itself in a severe cash crunch towards the end of calendar 2014. Improvement in some operating parameters were brushed aside and the stock was hammered by a barrage of bad news, such as large-scale flight cancellations and delays in employee salaries. Making matters worse was the squeeze by airline regulator DGCA, which directed the carrier to come up with a payment schedule for its dues, refund fares for cancelled flights within a month, and not book flights beyond a month in advance.

The promoter group, headed by Kalanithi Maran, was not inclined to put more good money after bad. Just when the end seemed nigh, came in the knight in shining armour — erstwhile promoter Ajay Singh who agreed to buy out a majority stake and pump in much needed funds.

SpiceJet lived to fight another day and the stock soared. The airline is in for heavy restructuring, but it continues to unleash price wars.

Things may be looking better for the sector with lower fuel cost and improving traffic. But growing and cut-throat competition could again throw a spanner in the works. Full recovery is still a long way off. If the Budget accedes to a long-pending demand and accords declared goods status to ATF, it will rationalise taxes and provide respite.

Related Topics