The auditor of Indian low-cost carrier SpiceJet has questioned the long-term viability of the carrier in India’s challenging market.
“The company’s operating results have been materially affected by various factors, and as of March 31, 2013 the company’s accumulated losses have fully eroded the net worth of the company,” said SR Batliboi & Associates in the company’s annual report for its fiscal year 2013 ended 31 March.
“The appropriateness of the going concern assumption is depended on the company’s ability to establish consistent profitable operations as well as raising adequate finances to meet its short term and long term obligations.”
The auditor’s views pushed SpiceJet’s shares down by 10% on the Bombay Stock Exchange on 30 September.
In late May, SpiceJet announced a full year operating loss of rupees (Rs) 1.7 billion ($27.2 million), an improvement over an operating loss of Rs5.5 billion in its fiscal year 2012.
The annual report reveals that the carrier’s average load factor in the 12 months fell to just 74%, 1 percentage point lower than in its fiscal year 2012, and 9 percentage points down from 83% in fiscal year 2011.
It attributed the reduced load factors to an increase in fares to help offset higher costs.
Despite the auditor's warning, the report’s management discussion appears to be upbeat about the carrier's prospects. It noted that the carrier added 14 domestic destinations and six international destinations in the year to 31 March.
In 2013-14, the carrier will add seven Boeing 737s that will be deployed on international routes.
It added, however, that India’s high inflation and reduced consumer spending on travel have hurt passenger demand. It also warns that the entry of new players could add more pressure in a market that is already challenging.
Nevertheless, it said that its penetration into three distinct markets – tier one cities, tier two cities and international destinations – provides a degree of insulation against newcomers.