Indian budget carrier SpiceJet Ltd. booked income on the expectation of receiving compensation from Boeing Co. for grounded 737 Max jets, posting its highest-ever profit in the process.
Airlines around the world have sought compensation from Boeing for order delays and losses caused by the grounding of the 737 Max in the wake of two deadly crashes. There’s no clarity on when those jets could fly again as regulators scrutinize corrective measures. Chinese airlines have said they may have lost more than $500 million due to the groundings.
“This aircraft has been grounded for no fault of SpiceJet. We are paying for expenses for the aircraft,” SpiceJet’s Chief Financial Officer Kiran Koteshwar said in an interview. “These are the rentals which we have incurred between April, May and June, and we have sent this and other numbers to Boeing. We are very sure this is the minimum we will get.”
SpiceJet posted a profit of 2.6 billion rupees ($37 million) for the three months ended June helped by the collapse of local rival Jet Airways India Ltd., which allowed it to raise fares 11%. The company’s revenue for the period included a notional income of 1.14 billion rupees on account of costs incurred on aircraft lease rentals.
SpiceJet’s auditors said there’s “no virtual certainty” to recognize such other income, according to the company’s earnings submitted to stock exchanges. That isn’t a disagreement with SpiceJet’s assessment, but rather a “judgment issue,” Koteshwar said.
Boeing, which had previously told SpiceJet that the Max would be back in the air by July, has now informed the airline that the plane may not fly before the end of this year, Koteshwar said. Airlines can typically wait for as many as 12 months, before moving to “Plan B,” which may include leasing older jets or moving to Airbus SE aircraft, he said.
SpiceJet, which has 13 of the 737 Max jets in its fleet, has ordered as many as 205 of the aircraft, making it one of the world’s biggest customers for the model.
By Anurag Kotoky