With its back up to the wall, SpiceJet has become the country's second-largest carrier, largely thanks to the series of discount-sale programs it has run this year, even as concerns over its solvency continue alongside and after it posted yet another quarterly loss.
In a release Wednesday, SpiceJet said it had 20.9 percent market share, compared to 19.6 percent for the Jet Airways-JetLite combine in July. Industry leader IndiGo's market share stood at 30.7 percent, marginally lower than 31.6 percent in the previous month.
Spice also stole a march over its rivals when it came occupancy: it had a passenger load factor of 79.4 percent, while IndiGo's load factor fell to a dismal 67 percent (compared to 73 percent in July 2013).
The Kalanithi Maran-owned carrier was the only one to report an increase in its market share.
"Our increase in loads and share is the result of our new network, improved branding and product and, most importantly, our dynamic pricing and revenue management approach, where we believe flying empty seats is a waste, especially for budget airlines," chief operating officer Sanjiv Kapoor said in a statement.
This year, Spice has resorted to numerous flash sales where it has offered flight tickets at extremely discounted prices. While analysts say the move has helped them raise much-need working capital during an acutely-stressed time (apart from helping increase its market share), they have wondered if such a move can be sustainable as such prices often also involve selling below cost.
The carrier, on the other hand, has defended its pricing and contented that – since flying a passenger at a discounted cost is better than flying an empty seat -- its strategy remains revenue-positive for itself.
SpiceJet, which ratcheted up a Rs 1,000-crore loss in FY14, reported a Rs 124 crore loss in the first quarter this year but made a small operating profit after adjusting for one-offs.
"Given the company's negative net worth (assets minus liabilities) of over Rs 1,000 crore and loan liability of Rs 1,500 crore, funding the operations, going forward, would remain a very challenging task for the company," ICICI Direct, which has a hold rating on the stock with the price target of Rs 13, said in a note.
SpiceJet stock price
On August 11, 2014, SpiceJet closed at Rs 13.14, down Rs 0.18, or 1.35 percent. The 52-week high of the share was Rs 26.65 and the 52-week low was Rs 12.50.
The latest book value of the company is Rs -22.24 per share. At current value, the price-to-book value of the company was -0.59.
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